HEALTH INSURANCE-HOW TO GROW A SYSTEM

John C. Lammers
Department of Communication
University of Illinois
CMN 463: Organizational Health Communication

Insurance

Concepts

pooled risk
moral hazard
adverse selection

Insurance

Insurance elements

premiums (probability * loss)

deductibles
coinsurance
upper limits
exclusions

Insurance

Common policy features

contract to pay for an agreed upon

range of services under specified
conditions either to subscriber or to
provider
about 80 %
specified conditions
guards pool
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Insurance
Health insurance example:
Provisions: $1,000 deductible
30% coinsurance
$8,000 upper limit
Hospital bill: $10,000
Exclusion: $1,000
How much do you owe?
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Insurance
Example, continued: timing matters
A B C
Upper limit Coinsurance Deductible
Deductible Deductible Coinsurance

Ins:4900 5300
5600
You:5100
4700
4400
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The Medicare benefit

package

benefits financed primarily by

payroll taxes
general tax revenues
beneficiary premiums

beneficiaries responsible for paying a

portion of the cost of most covered
services

Deductibles
coinsurance.
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The Medicare benefit

package

limited to acute care services and

prescription drugs needed for diagnosis
or treatment of illness or injury.
coverage through traditional program or
a private health insurance plan Medicare
Advantage (MA) (aka Part C).
Traditional Medicare covers services in
three parts
hospital insurance program (Part A),
supplemental insurance program (Part B)
prescription drug benefit (Part D).

The Medicare benefit

package

Part A benefits: Social Security recipients on the

basis of age or disability entitled to

hospital inpatient care,

short-term care in skilled nursing facilities,
post-institutional home care, and hospice services.

Part B enrollment voluntary

Vast majority of beneficiaries enroll and pay a
monthly premium deducted from SS

physicians and other practitioners services,

hospital outpatient and other outpatient facility services,
home health services not covered under Part A
diagnostic tests, durable medical equipment, ambulance
services, and limited preventive services and outpatient
prescription drugs

The Medicare benefit

package

Part D covers outpatient prescription drugs not

covered under Part B, also voluntary
beneficiaries must have at least two prescription
drug plans to choose from in their region
responsible for a premium that depends on the
plan they choose
premiums fully subsidized if their income is below
135% of FPL and assets are less than $7,620
(single) $12,190 (married)
premiums partially subsidized on sliding scale for
beneficiaries if income above 135% and below
150% of the FPL and assets less than $11,710
(single) or $23,410 (married).

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The Medicare benefit

package

MA program: receive Medicare benefits by enrolling

in participating private plans

Private plans must cover the same services as Part A

and Part B of traditional Medicare
cost-sharing requirements may differ as long as they
are at least actuarially equivalent

health maintenance organizations, preferred provider

organizations, or private fee-for-service plans.

average projected cost-sharing liability per person must be

the same or smaller.

can also receive Part D benefits through an MA plan

may receive other benefits, such as reduced costsharing requirements or other products and services
not covered by traditional Medicare.

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Medicaid

Medicaid elements
Welfare: assistance for the poor
eligibility: AFDC
SSI (aged/disabled/blind)
varies by state
generally single-parent households
medically needy and indigent
benefits: hospital IP and OP
lab and xray
snf for over 21
home health
physician services
family planning; children's services

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Medicaid

continued:
benefits: no balance billing
no deductibles
no copayments
Administration:
Federal government 55% funds (general
revenues)
all states except Arizona
much variability

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Managed Care

Prospective payment

determined in advance of services

for hospitals: DRGs
for physicians: RBRVS

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Managed Care

Prospective payment
determined in advance of services
for hospitals: DRGs
467 diagnoses; Yale, 1975
first applied by Medicare
psychiatrics excepted

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Managed Care

Prospective payment for physicians:

RBRVS
formerly: UCR
prevailing: 75th of the MDs in the area
adjusted using an index
7,000+ common procedures X locality (200) X
specialty (50) = 70 million different possible
payments (!!)
RBRVS: relative work/practice costs/training
costs based on survey of 3,164 physicians
(time, effort, skill, stress)
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