Introduction to Healthcare and Public Health in the US Welcome to Introduction to Healthcare and Public Health in the US: Financing Healthcare (Part1). This is Lecture (d). The component, Introduction to Healthcare and Public Health in the US, is a survey of how healthcare and public health are organized and services delivered in the US. Financing Healthcare (Part 1) Lecture d This material (Comp1_Unit4d) was developed by Oregon Health and Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number [IU24OC000015)].

Financing Healthcare (Part 1) Learning Objectives Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare.  (Lecture b) Describe models of health care financing in the US and in selected other countries. (Lecture c) Describe the history and role of the health insurance industry in financing healthcare in the United States, and Federal laws that have influenced the development of the industry. (Lecture a) Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. (Lecture d) Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare. (Lecture d) Describe the organization and function of Medicare and Medicaid. (Lecture e) The objectives for Financing Healthcare (Part 1) are: Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare; Describe the models of healthcare financing found in the US and in selected other countries;  Describe the history and role of the health insurance industry in financing healthcare in the US, and Federal laws that have influenced the development of the industry;  Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs;  Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare; and   Describe the organization and function of Medicare and Medicaid Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Payers in the US Healthcare System US Multipayer System Role of insurance How payers reimburse providers for healthcare services The Private Healthcare Payer System How health insurance works Sources of health insurance Types of health insurance Managed care Regulation of private health insurance This lecture discusses payers in the US healthcare system. It will describe how health insurance works and how insurers pay healthcare providers for their services. It will cover the two sources for healthcare financing, who is allowed to offer insurance, and the different types of health insurance plans. It will also introduce the the concept of managed care, the types of managed care plans, and how managed care affects and controls insurance costs. Finally, this lecture will describe the role of state and federal laws in regulating private health insurance companies. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Health Insurance Spreads the financial risk over a large pool of people Balances risk with cost 5% of the risk pool accounts for approximately 50% of the pool spending People over age 65 consume more health care than other age groups do Insurance cost is influenced by prescription costs, technology, an aging population, many with chronic conditions, government subsidies and plan administrative costs. Health insurance spreads the financial risk for healthcare expenditures for a group of people by pooling money or premiums paid on their behalf into a large fund. A payer uses the pool of money to pay or reimburse for healthcare services provided to the individual members of the group. In a given year, approximately five percent of the people enrolled in a health insurance plan consume about half of all the money available in the pool. Health plans stay solvent in most cases because each year all of its members contribute more money than they use. The cost of health insurance is influenced most by prescription costs, technology, an aging population, the prevalence of chronic conditions, government subsidies, and health plan administrative costs. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

How Insurers Pay Providers The provider submits a claim Claim must include at least one diagnosis code, and one procedure code for each service rendered Diagnosis code = ICD-9-CM Procedure code = CPT code or DRG code A medical claims examiner or adjuster processes the claim Determines “usual and customary” charge Deducts any portion the patient is responsible for Deducts any contractual provider discount Reimburses the remainder Before beginning this discussion of health insurance, it is important to understand how providers receive payment from payers or insurance companies. Whenever a patient sees a doctor, gets tests run, or goes to the hospital, the provider prepares one or more claims to receive insurance reimbursement. Information about the patient and the services received is described in two kinds of codes – a diagnosis code and a procedure code. A diagnosis code is called an ICD-9-CM code. ICD stands for International Classification of Disease and CM stands for Clinical Modification, to designate that this collection of codes was revised from an earlier version. A procedure code is called a CPT code, which stands for Current Procedural Terminology in the case of physicians, and a DRG, or diagnosis related group, in the case of hospitals billing Medicare. The procedure code describes the services provided by the provider. Most claims are sent electronically to the insurance company, where the medical claims examiner or adjuster processes it according to the insurance plan’s guidelines. The examiner subtracts from the bill any amount considered in excess of the plan’s so-called usual and customary charge. The examiner also subtracts any patient co-payment, co-insurance, or deductible, as well as the provider’s pre-negotiated discount for services. The balance is then remitted to the provider in an explanation of benefits or remittance advice. An explanation of benefits (EOB) or remittance advice (RA) is a document issued by the payer stating the status of the claim; whether it is paid, suspended (pending), rejected, or denied. The purpose is to provide detailed payment information relative to the claim and, if applicable, to describe why the total original charges have not been paid in full. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 5

How Insurers Pay Providers (continued) The patient and provider receive an explanation of benefits (EOB), also called remittance advice Regardless of whether claim is accepted or denied Regardless of whether the patient receives a check A claim can be denied for many reasons: Coding errors or insufficient information Procedure considered experimental or otherwise not covered by the policy Rejected claims can be appealed If a claim isrejected the reason must be stated in the explanation of benefits or remittance advice. Claims can be denied because of coding errors or insufficient information, because a service is not covered under the policy, or because a procedure is still considered experimental. Many employer-provided insurance plans have a process for allowing patients to appeal a rejected claim. Under the recent healthcare reform law, more companies are required to establish this process as well as allow patients to have a rejected claim reviewed by an independent third party. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 6

The Multipayer US Healthcare System Contributors Private sources Employers and employees Contributions to private health insurance Out of pocket Other Public or government sources Federal & State and local Payroll and general tax revenues Special tax, e.g. sales tax As mentioned previously, contributors to healthcare financing include private and public or government sources. Private sources include employers who purchase insurance policies or pay directly for healthcare expenditures through a self-insured plan. Individuals and families contribute through the employee portion of health insurance premiums and through out-of-pocket expenses. Federal, state, and local governments collect payroll taxes from employer and employees and general tax revenues that is used to fund government financed insurance. Occasionally special tax methods are used such as a sales tax. The money contributed from government and private sources is pooled into large funds and distributed by payers. Payer was previously defined as a pool of funds, without reference to any specific payer. The next slides will expand this definition to include different organizations or plans that pay for the healthcare services either through a private health insurance plan or through a government insurance program. Each insurance pool or fund pays or reimburses on behalf of the individuals who meet the eligibility requirements for the group represented by the plan or program. For example, eligibility may be due to age as in Medicare and the Children’s Health Insurance Program (CHIP), socioeconomic category as in Medicaid, or employment status for a large corporation that self-insures. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 7

Public vs. Private Insurance Primarily state-licensed companies Self-insured employer plan ERISA regulates Third-party administrator Public insurance is government or administered Medicare Medicaid Children’s Health Insurance Program (CHIP) The two basic types of health insurance are public and private with the difference being who is responsible for the programs. Public insurance is run by the federal government, state government, or both, meaning the government provides the coverage and pays the providers. Medicare is for people age 65 and older and for certain people with disabilities. Medicaid is for low-income people. CHIP [chip] provides low-cost health insurance coverage to children in families that earn too much qualify for Medicaid but cannot afford private health insurance. Medicaid and CHIP [chip] receive federal funding, but are administered by the states. Private health insurance is funded and run by individual organizations that are licensed by a state. Consumers usually obtain private insurance through their employer. In some cases, employers self-insure in which case they finance and pay for all the healthcare expenditures of their employees. These plans usethe guidelines in the Employee Retirement Income Security Act or ERISA legislation (discussed later in this lecture). In these plans, the employer administers the plan and assumes all the risk for the healthcare expenditures of its employees. An employer may contract the claims paperwork to a third-party administrator, or TPA. This remainder of this lecture will focus on private health insurance, followed by government health insurance in the next lecture. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 8

Types of Private Health Insurance Indemnity plans - “traditional” plans Fee for service Simply provide reimbursement to providers Less prevalent today Managed care plans prevail today Offer financial incentives to providers and patients Integrate the financing and delivery of care within a single system The contract that an insurance company offers is either an indemnity plan or a managed care plan. Generally, the contract for insurance is between the individual or family and the insurance company or payer, and not between the insurance company and provider. There are two types of private health insurance plans.  Indemnity plans are “traditional” plans based on a fee-for-service model. Under these plans, providers are paid according to the services they perform. For example, if you break your arm, the company pays a different fee for each service provided, such as a fee for the x-ray and a fee for applying a cast. Today, relatively few indemnity plans exist. Instead, most health plans are managed care plans. Managed care is a term to describe the techniques designed to provide comprehensive healthcare, manage outcomes and quality, and control costs through a managed care organization. Managed care became popular in the 1970s with health maintenance organizations, or HMOs. Managed care controls costs by providing financial incentives to providers and patients. A key difference between the two types of plans is indemnity plans simply finance healthcare by paying reimbursements to providers. In contrast, managed care plans integrate the financing and delivery of care into one system. The current delivery of "managed care" services is considerably different than the HMO models of the 1970s, 80s, and 90s. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 9

Blue Cross/Blue Shield Independent, state-licensed organizations Historically set up as not-for-profits under special state laws Blue Cross reimburses hospitals Blue Shield reimburses physicians Today, some Blue Cross/Blue Shield organizations operate as commercial insurers Before continuing with the discussion of managed care, Blue Cross/Blue Shield is a special case that deserves separate mention here. It is a collection of private insurance organizations, each of which is independent and licensed by a state. Blue Cross reimburses hospitals and Blue Shield reimburses physicians, but the two organizations function as a whole. Historically, Blue Cross/Blue Shield consisted of not-for-profit associations organized to circumvent state insurance licensing requirements. Today, some Blue Cross/Blue Shield organizations operate as commercial for-profit insurance companies. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 10

Managed Care Managed care: term for techniques designed to control costs and improve quality Managed care organization (MCO) – a business model which integrates financing and delivery of health care using managed care techniques Features Comprehensive care Controlled access to care Manage outcomes and improve quality care Reduce costs Rationing and quality of care concerns A managed care organization, or MCO, is a business model that integrates financing and delivery of healthcare, using managed care techniques. Managed care can be separated into two distinct functions - one is the methodology and techniques used for provider reimbursement, and the other is the provision of comprehensive quality medical care. Managed care organizations share common features. All have controlled access to comprehensive care and manage the care provided using various techniques designed to reduce costs yet improve the quality of care. Patient concerns about rationing and the quality of care received through withholding of services by early health maintenance organizations resulted in new managed care models. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Managed Care Organizations HMO = Prototype using capitation New models Mix and match reimbursement methodologies Greater patient choice Increased costs MCO Models Health Maintenance Organization (HMO) Preferred Provider Organization (PPO) Exclusive Provider Organization (EPO) Point of Service Plan (POS) HMO plans were the prototype MCOs, and provided care to members during sickness, and encouraged prevention and wellness. Original HMOs used an episode of care reimbursement methodology called capitation, and limited member access only to designated plan providers. The newer models of MCOs listed on this slide developed as concerns grew that care was being withheld at the expense of patients. The new models mixed-and-matched reimbursement methodologies, permitting greater patient choice of providers, but increasedthe cost of care from the original HMO model. These four MCO models will be discussed in more detail later in this lecture. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

The “Managed” in Managed Care Delivers high-quality health care Controls costs Patient and provider incentives Utilization review Determine medical necessity of care Role as gatekeeper Different types of managed care plans Plan differences based upon cost and provider choice Managed care “manages” the accessibility, cost, and quality of healthcare. Managed care plans control what contracted providers are paid and use cost-containment strategies, such as incentives for physicians and patients to choose less costly forms of care, and utilization reviews to determine the medical necessity of services. For this reason, many people consider managed care a gatekeeper. Today, many versions of managed care plans exist, their heir differences based primarily on cost and provider choice. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 13

Cost vs. Provider Choice The various managed care plans are defined by choices in what providers the patient can use Fewer choices translate to lower health care premiums and lower out-of-pocket costs Types of managed care plans have varying degrees of choices and costs Health maintenance organization (HMO) Preferred provider organization (PPO) Point-of-service plan (POS) Managed care plans differ with regard to the number of choices its members have which has a direct relationship to healthcare costs. Fewer choices, usually in the form of restricting a patient’s selection of healthcare providers, translates to lower insurance premiums and lower out-of-pocket costs. However, some people prefer the freedom to choose their own doctors and this choice and the additional costs involved is an important issue. There are three types of managed care plans: health maintenance organizations, or HMOs; preferred provider organizations, or PPOs; and point-of-service plans, or POS [P-O-S]. A variation of the PPO is the exclusive provider organization or EPO. The next slides will detail the varying degrees of choice and cost in each of these models. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 14

HMO Models Staff model: Doctors are salaried employees Group model: Doctors are employed by a group practice; the plan contracts with the practice for their services; most patients that a doctor sees are patients in that plan Open-group model: As above, but doctors are freer to accept patients from outside the plan Independent physician association (IPA): Doctors are organized into a legal entity; have autonomy but also contract with the plan Network model: The plan contracts with multiple independent physicians, group practices, and/or IPAs Mixed model: Mixes and matches any of the above HMOs represent the lowest cost managed care organization. There are various types of HMOs, with the differences depending mainly on the working arrangement providers have with the organization. In a staff model HMO, the physicians are salaried employees. They see only patients who are enrolled in that HMO, and they see patients in a clinic operated by the HMO. In a group model HMO, the physicians are employed by an independent, physician-owned group practice, and the HMO contracts with them for services. In this arrangement, HMO patients are the bulk of a physician’s business, and again, patients are seen in a clinic run by the HMO. In an open-group HMO, the organization contracts with individual physicians, who are free to contract with multiple plans. Patients are often seen in a clinic operated by the HMO. In an independent physician association, or IPA, the HMO contracts with physicians who are organized into a group such as a corporation, partnership, or foundation. The physicians retain their independence to see other patients, and they see patients in their own offices, not a clinic operated by the HMO. The IPA model is now used in the majority of HMO plans. In a network model, the HMO contracts with multiple independent physicians, group practices, and/or IPAs. Reimbursement is only made to providers within the HMO. No reimbursement is available for healthcare services by providers outside the HMO. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 15

Preferred Provider Organization (PPO) PPO - patients free to choose any provider In-network providers Lower deductibles, copayments, and coinsurance Out-of-network providers Higher deductibles and coinsurance for the patient EPO – patients must use network providers No reimbursement for out of network provider services No gatekeeper for either a PPO or EPO In a PPO, reimbursement is provided using a fee-for-service methodology where patients receive discounts and savings for using network providers. This includes lower deductibles, copayments, and coinsurance. In a PPO, a patient is free to seek care from any provider they choose outside the network and receive some reimbursement. A variation of the PPO is the exclusive provider organization, or EPO. It is similar to a PPO, but care must be obtained through network providers only. Healthcare services supplied by providers outside the network are not reimbursable through the EPO. In both the PPO and EPO plans, a gatekeeper does not control access to medical services and individuals may seek care from any provider. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Point of Service Plan Point of Service Plan Gatekeeper All services through the gatekeeper – the point of service - controls access to all medical services Referrals generally to in-network providers only May refer out-of-network No reimbursement for services to out-of-network providers unless previously authorized by gatekeeper The point of service plan, or POS, includes a primary care physician, or gatekeeper, who controls access to plan only providers, similar to an HMO. The primary care physician becomes the point of service for delivery of all healthcare services. In a POS plan, referrals can be made out of network at the discretion of the primary care physician. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Indemnity vs. Managed Care Programs Feature Fee for service HMO PPO POS EPO Provider network None Strict or exclusive Broad Hybrid of HMO/PPO Physician choice Unlimited PCP required PCP not required PCP not required Referrals Not needed Must come from PCP Required if out of network None out-of-network Precertification Required Not usually required Not usually required Preventive care Usually not covered Covered Some covered Varies Relative cost to patient High Low Medium–high Low-medium Medium This table summarizes and compares indemnity and managed care programs. Indemnity programs have the most freedom of choice, but they cost the most. HMOs have the least freedom of choice and cost the least. As previously mentioned, all managed care plans limit member choice by designating a network of providers. The providers accept reduced reimbursement from the managed care program in exchange for patients referred through the plan. PPOs offer a broader network than HMOs do. So-called in-network providers are reimbursed more by the insurance plan than out-of-network providers. A patient might pay as much as forty percent more for out-of-network services. Choice of physicians is most limited with an HMO, which also requires the patient to designate a primary care provider, or PCP. Patients must see this provider first in order to get a referral to a specialist. PPOs and POS plans do not have this requirement. HMOs require precertification, a process for checking the patient’s eligibility and authorizing a medical procedure or hospitalization before it occurs. If precertification is skipped, the HMO may not pay for the patient’s care. The exception is in case of an emergency, but even then, the incident must be certified as necessary after the fact. PPOs do not usually require certification. Another difference between HMOs and PPOs is that HMOs generally pay more for preventive care, which lowers costs for everyone. Note that a POS plan is a hybrid. It has the flexibility of a PPO, with a cost comparable to an HMO. A POS relies heavily on preventive care. Members have a primary care physician who may refer members to providers outside the network if deemed necessary. 4.9 Table: (2011, CC BY-NC-SA 3.0). Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 18

Regulation of Private Health Insurance States control the legal structure of private insurers and monitor their finances Purpose: To ensure the company can meet its obligations to the people it insures Private insurance companies are also regulated by federal laws Federal law may take precedence over state law Private insurance is regulated by both state and federal laws. States regulate commercial health insurers. They control the legal structure of private insurers and monitor their finances to make sure they can meet their obligations to the people they insure. Companies must prove they have enough money to pay all anticipated claims for the year, along with their administrative and operating costs, and they must maintain a certain amount of excess funds or reserves, in case claims exceed projected experience. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 19

Federal Regulation of Private Health Insurance Employee Retirement Income Security Act (ERISA) 1974 Permits and regulates self-insured health plans Does not require employer plan Requires plans to meet minimum standards Requires a grievance and appeals process Gives participants the right to sue for benefits Requires plan administrators to meet certain standards of conduct There are multiple Federal laws regulating both public and private health insurance. Many of the laws have been mentioned previously in the history of the US health insurance system. One of the most important federal laws about regulation of private insurance is the Employee Retirement Income Security Act of 1974 or ERISA [uh-riss-uh]. It sets certain minimum standards for employer-provided health plans. It allows employers to self-insure, effectively permitting an employer to create an insurance company bypassing state requirements. For any ERISA organized health plan, states laws may not pre-empt Federal rules and regulations. It requires that employers provide an appeals process so employees can get benefits, and it allows employees to sue for benefits. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 20

Regulation of Private Health Insurance (continued) Consolidated Omnibus Budget Reconciliation Act (COBRA) 1985 An amendment to ERISA, implemented in 1986 Allows employees to choose continuation of group health benefits in certain cases Voluntary or involuntary job loss Reduction in hours worked, Transition between jobs, Death of a spouse, divorce, and certain other life events Individuals may have to pay premium up to 102% of cost Generally required for group health plans of companies with 20+ employees COBRA is an amendment to ERISA that allows employees to continue their healthcare insurance in certain cases, such as voluntarily leaving a job, involuntary job loss, death of a spouse, and divorce. Individuals usually have to pay at least some of the premium themselves, and they may even pay slightly more than what the insurance formerly cost. Companies with fewer than twenty employees are not generally required to offer COBRA benefits. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 21

Regulation of Private Health Insurance (continued) Health Insurance Portability and Accountability Act (HIPAA) 1996 Amendment to ERISA Defines “protected health information” and helps ensure its privacy Protects participants in group health plans Prohibits discrimination based on health status Provides additional opportunities to enroll in group health plan, after loss of coverage or certain life events For some people, guarantees access to individual insurance - American Recovery and Reinvestment Act (ARRA) of 2009 strengthened law and provided penalties Most people are familiar with HIPAA, the Health Insurance Portability and Accountability Act, because of the notices required with visits to a healthcare provider. The most publicized part of HIPAA, protects the privacy of patient information. Lesser-known HIPAA provisions are just as important. HIPAA gives employees and their families access to group insurance regardless of their health status, such as previous claims experience or knowledge of genetic disease. For many employees who lose insurance coverage, it provides opportunities to join other group plans or buy individual insurance. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 22

Regulation of Private Health Insurance (continued) ERISA mandated coverage Newborns' and Mothers' Health Protection Act 1996 Plans that offer maternity coverage must pay for at least a 48-hour hospital stay following childbirth Mental Health Parity Act 1996 Requires equality for coverage of mental illness Women's Health and Cancer Rights Act 1997 Provides for post-mastectomy benefits including reconstructive surgery and treatment of complications Other amendments to ERISA regulate private insurance by requiring that certain types of coverage be provided. For example, the Newborns and Mothers Health Protection Act of 1996 provides for at least a forty-eight hour hospital stay following childbirth. The Mental Health Parity Act of 1996 requires that lifetime and annual dollar limits on coverage for mental illness be the same for mental illness and medical or surgical benefits. The latest rider on this bill was in 2008 when the Troubled Asset Relief Program (TARP) was signed into law by President George W. Bush. Finally, the Women's Health and Cancer Rights Act of 1997 provides coverage of certain post-mastectomy benefits for women who undergo mastectomy that includes reconstructive surgery and treatment of complications. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 23

Regulation of Private Health Insurance (continued) The Patient Protection and Affordable Care Act (PPACA) 2010 (Healthcare Reform Law) No limit or denial of coverage for children under 19 with preexisting conditions Adults no longer denied insurance due to preexisting condition Ends lifetime limits and most annual limits on care Allows children under 26 to stay on parent’s plan Some plans will provide free access to preventive services Provides 50% discount on brand-name drugs for seniors in the Medicare “donut hole” More benefits will be phased in through 2014 The Patient Protection and Affordable Care Act, passed in 2010, is the official name for what many refer to as the healthcare reform law. This law is scheduled to take effect over time, through 2014. For now, the law improves access to health insurance for children, young adults, and people who have been denied insurance due to a preexisting condition. In addition, insurance companies are no longer allowed to impose lifetime limits on most benefits, and the law is phasing out the annual limits that companies can impose. Patients in some plans get free access to certain preventive services, and seniors who are experiencing the Medicare D coverage gap receive a fifty-percent discount on brand-name drugs. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 24

Financing Healthcare (Part 1) Summary – Lecture d Insurance works by spreading financial risk Insurers pay providers based upon Diagnosis and procedure codes, contracted rates States license and regulate private insurance Types of plans include indemnity, Blue Cross and Blue Shield and managed care plans Managed care uses techniques that result in lower healthcare costs and improved quality Some Federal laws regulate private health insurance ERISA, COBRA, HIPAA, and the Affordable Health Care Act This concludes Lecture (d) of Financing Healthcare Part 1. In summary, insurance works by spreading financial risk. Insurers pay providers based upon the diagnosis code, procedure code or the service provided, and contractual agreements for fees. Individual organizations run private insurance and operate under state and Federal laws. Different types of insurance plans include indemnity plans, Blue Cross Blue Shield plans, and managed care plans. The term managed care is used to describe techniques designed to provide comprehensive healthcare, manage outcomes and quality, and control costs. Managed care balances choice with cost where fewer choices translate to lower insurance premiums and lower out-of-pocket costs. Both state and federal laws regulate private health insurance. The most important federal laws regulating insurance are ERISA, COBRA, HIPAA, and the Affordable Care Act. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 25

Financing Healthcare (Part 1) References – Lecture d American Association of Preferred Provider Organizations. PPO resources. http://www.aappo.org/index.cfm?pageid=10. Accessed April 10, 2011. American Association of Preferred Provider Organizations. PPO Toolkit. http://www.aappo.org/AAPPO_Toolkit_FINAL.htm. Accessed April 2, 2011. Bihari M. Understanding the Medicare Part D donut hole: learn about the Medicare Part D coverage gap. http://healthinsurance.about.com/od/medicare/a/understanding_part_d.htm. Accessed April 7, 2011. Centers for Medicare and Medicaid Services. Children’s Health Insurance Program (CHIP). http://www.cms.gov/home/chip.asp. Accessed April 7, 2011. Centers for Medicare and Medicaid Services. http://www.cms.gov. Accessed April 7, 2011. Congressional Budget Office. Statement of Douglas W. Elmendorf, Director. CBO’s analysis of the major health care legislation enacted in March 2010 before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives. March 30, 2011. www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf. Accessed April 3, 2011 Cornell University Law School. Workers’ Compensation: an overview. http://topics.law.cornell.edu/wex/Workers_compensation. Accessed April 7, 2011. Kaiser Family Foundation. Health care costs: a primer. August 2007. www.kff.org/insurance/upload/7670.pdf. Accessed April 2, 2011. Kaiser Family Foundation. How private health care coverage works: a primer—2008 Update. April 2008. www.kff.org/insurance/upload/7766.pdf. Accessed April 2, 2011. References slide. No audio. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Financing Healthcare (Part 1) References – Lecture d Levey NM. Questions and answers about new rules on appealing rejections of health insurance claims. Los Angeles Times. July 23, 2010. http://articles.latimes.com/2010/jul/22/nation/la-na-health-rules-qa-20100723. Accessed April 12, 2011. Marcinko DE. Understanding the Medicare Prospective Payment System. September 17, 2009. http://medicalexecutivepost.com/2009/09/17/understanding-the-medicare-prospective-payment-system. Accessed April 7, 2011. MCOL. Managed care fact sheets. http://www.mcareol.com/factshts/factnati.htm. 2011. Accessed April 9, 2011 Medicare.gov. Medicare Advantage (Part C). http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/part-c.aspx. Accessed April 7, 2011. National Association of Workers’ Compensation Judiciary. http://www.nawcj.org. Accessed April 7, 2011. National Bureau of Economic Research. Prospective Payment System (PPS) data. http://www.nber.org/data/pps.html. Accessed April 7, 2011. Obringer LA, Jeffries M. How health insurance works. http://health.howstuffworks.com/medicine/healthcare/insurance/health-insurance.htm. Accessed April 2, 2011. Partners Human Research Committee. Overview of the HIPAA final privacy regulations. http://healthcare.partners.org/phsirb/hipaaov.htm. Accessed April 10, 2011. Purcell P, Staman J. Summary of the Employee Retirement Income Security Act (ERISA). Congressional Research Service report RL34443. May 19, 2009. http://aging.senate.gov/crs/pension7.pdf. Accessed April 3, 2011. References slide. No audio. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d

Financing Healthcare (Part 1) References – Lecture d Tufts Managed Care Institute. Managed care models and products. 1998. www.thci.org/downloads/ModelsProducts.pdf. Accessed April 10, 2011. U.S. Department of Health and Human Services and U.S. Department of Justice. Stop Medicare fraud: learn more about fighting fraud. http://www.stopmedicarefraud.gov. Accessed April 7, 2011. U.S. Department of Labor. Health plans and benefits. http://www.dol.gov/dol/topic/health-plans. Accessed April 11, 2011. U.S. Department of Labor. Workers’ Compensation. http://www.dol.gov/dol/topic/workcomp/index.htm. Accessed April 7, 2011. WorkersCompensation.com. http://www.workerscompensation.com. Accessed April 7, 2011. References slide. No audio. Chart, Tables, Figures 4.9 Table: Indemnity vs. Managed Care Programs (2011, CC BY-NC-SA 3.0). Health IT Workforce Curriculum Version 3.0/Spring 2012 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture d 28