This document discusses health care costs, payment models, and insurance in the United States. It explains that health insurance status and type of coverage significantly impact out-of-pocket costs and ability to adhere to treatment recommendations. Various insurance types like private, employer, government, and uninsured are compared. Reimbursement models for providers like fee-for-service, diagnosis-related groups, and accountable care organizations are also overviewed. The document advocates for individualizing care based on insurance coverage to improve quality while decreasing unnecessary costs.

1. Health Care Costs
and Payment Models
2018• Presentation 2 of 6

2. Learning Objectives
• Explain the basics of health insurance and coverage
• Demonstrate the complexity of health care costs and the large
variation in out-of-pocket costs based on insurance status
• Weigh the impact of insurance coverage and out-of-pocket costs
with the ability to adhere to treatment recommendations
• Explore how provider reimbursement models can affect delivery
of high value care
• Encourage physicians not to practice “one size fits all” medicine

3. • Mr. M is a 28-year-old man with severe abdominal pain, ED
diagnosis of a ruptured appendix; treated with IV antibiotics
for 4 days, followed by surgery
• Patient: “I grew up in a family without health insurance my
whole life, and our policy was basically ‘Give it a couple of
weeks’… so I didn't want to call 911 or go to an emergency
room.”
An Uninsured Patient’s Perspective

4. • Julian McCullough, comedian
• Recorded at “Told,” a storytelling show
in New York City
• As heard on This American Life (NPR)
(#439)
• “How much? No health insurance, 7
days in the hospital, … appendectomy:”
$45,000
An Uninsured Patient’s Perspective1

5. • Cost: Dollar amount for a provider to deliver a health care service
• Charges: The financial amount a health care provider asks for a service
• Often much higher than cost and reimbursement
• Only uninsured patients are billed charges
• Reimbursement: Amount a third party payer (i.e., insurance) negotiates as
payment to the provider
• May drive charge inflation
• Price: the amount a patient pays out of pocket for a service
• Hardest number to estimate, but this matters most to patients
Health Insurance Terminology2

6. Health Insurance Sources3,4
Employer-Based: 46%
Medicaid and CHIPS: 17%
Medicare (65+): 16%
Uninsured: 8%
Military: 4%
ACA Exchange: 3.5%
ACA Medicaid: 3%
Other: 3%
2016 Data:

7. • An individual person pays a premium directly to a “health plan”
or insurance company, which reimburses providers
• Plans offered directly from insurance companies or through
marketplaces or exchanges
Insurance Types: Individual Private

8. • Employers usually pay all or part of the premium for their employees
• Tax-deductible business expense, not counted as taxable income for
employee
• In essence, government is subsidizing employer-sponsored health
insurance
Insurance Types: Employer Private

9. • In the late 1950s, less
than 15% of the elderly
had health insurance
• In 1965, Medicare (for
elderly) and Medicaid (for
poor) was enacted
• First tax-financed
government insurance
Insurance Types: Government

10. Medicare Plan Structure5
Part A Hospital services
Part B Physician services, outpatient, durable
medical equipment
Part D Voluntary prescription coverage
Medicare
Advantage
“Part C”, Medicare benefits through private
insurers
Medigap Supplemental insurance, can cover copays,
deductibles, and other costs

11. Medicare Part A
• Hospital insurance plan for the
elderly
• Financed through social security
taxes (SSI)
• At age 65, pts who have paid >10
yrs. into SSI automatically enrolled
• Those <65 totally and permanently
disabled may enroll after 24 mos
of disability
• Those on dialysis usually enrolled
without wait period
Medicare Part B
• Insures the elderly for physicians’
services
• Financed by federal taxes and
monthly premiums from
beneficiaries
• Available to those eligible for
Medicare Part A who elect to pay
the Medicare Part B premium of
$134.00/month
Medicare Plan Structure

12. Medicare Part D
• Voluntary prescription coverage that is added to original
Medicare, or included in Medicare Advantage
• Plans have monthly premiums in addition to that paid for
Part B, average around $30 but wide variation
• Usually tiered formularies with copayments
• Deductibles vary but may not exceed $405 per year
Medicare Plan Structure

13. Medicare Advantage Plan
• Beneficiaries can enroll in a private health plan to receive
Medicare covered benefits
• Medicare pays private insurers a set monthly fee per member;
insurers manage risk
• Plans must cover Medicare parts A and B, usually cover D
• Rules vary: referrals for specialty care, restrictions on out-of-
network care
Medicare Plan Structure

14. • Federal program administered by the states, with the federal
government paying between 50% and 76% of total Medicaid costs
• Required coverage includes: hospital, physician, laboratory,
radiology, prenatal, preventive, nursing home, and home health
services
• Pharmacy coverage is optional but currently is provided in all
states
• Covered groups: non-elderly, low income persons and the disabled,
no requirement for prior tax payments, evolving work requirements
in some states
Medicaid6

15. Pre-ACA: Who were the uninsured?7
• Adults without dependent children
• Low income families (<400% poverty level)
• Moderate income families (too high to qualify for Medicaid,
too low to afford private insurance, some without access to
employer sponsored insurance coverage)
• Undocumented persons
Affordable Care Act

16. • Aims: To decrease the number of uninsured Americans and reduce
health care costs
• Passed in 2010, upheld in Supreme Court in 2012, 2015
• Expansion of coverage:
• Individual mandate (removed in the 2017 tax bill effective 2019)
• Medicaid expansion: Set the Medicaid minimum income
eligibility across the US to <138% of the federal poverty level
• Health insurance exchanges: competitive markets with clear
information to assist persons in purchasing insurance; subsidized
for families <400% poverty limit
Affordable Care Act7

17. Access to Health Care7
Ongoing challenges:

18. • Ms. O is a 62 year-old woman presenting to the ED with dense
right hemiparesis and aphasia. CT scan confirms a large MCA
infarct and her labs reveal previously undiagnosed
hyperlipidemia. Review of a prior ED visit for an unrelated
issue reveals that she has untreated hypertension. She is
uninsured and has not seen a doctor in over ten years.
• How did her lack of health insurance contribute to this
outcome?
Case: Access to Health Care

19. Does Health Insurance Make a Difference?
7,8
• Fewer regular medical visits and preventive health screenings
• Lower survival rates for breast and colorectal cancer
• Increased mortality (likely owing to greater morbidity from
undiagnosed medical conditions)
• Less care during hospitalization
• Less likely to receive a costly test or procedure
• Higher in-hospital mortality rates
Access to Health Care

20. Small Group Activity:
• A 37 year-old man presents to his PCP with progressive dysphagia to solids, without
weight loss
• No history of tobacco use or alcohol use
• Physical exam was normal. CBC, BMP, and LFTs were all unremarkable
• You tell the patient that you think should see a gastroenterologist and get an
endoscopy
• The patient asks you what he can expect to pay out of pocket for this workup
Case: Out-of-Pocket Costs

21. • Work in groups to complete the chart using Health Care Bluebook
• Use healthcare.gov to find the charges for high deductible plan (i.e. IBC Bronze)
• How do out-of-pocket costs affect adherence to the treatment plan?
GI Office Visit Endoscopy
Charges
Out-of-Pocket Cost: Insurance with
copay
Out-of-Pocket Cost: High deductible
plan or uninsured
Out-of-Pocket Cost: Medicare
Case: Out-of-Pocket Costs

22. GI Office Visit Endoscopy
Charges $424 $1,528
Out-of-Pocket Cost: Insurance with
copay
$25 $25
Out-of-Pocket Cost: High deductible
plan or uninsured* $424 $1,528
Out-of-Pocket Cost: Medicare $340 $1,222
*Until deductible of $7150 (federal maximum) paid, then no charge
*Uninsured patients may have discounted costs based on their income
Case: Out-of-Pocket Costs

23. Diagnosis-related groups (DRGs)
• Physician or hospital is paid one sum for all services delivered during one illness; there is a
different set case-price for each of approximately 750 distinct DRGs (Medicare).
Per Diem
• The hospital is paid for all services delivered to a patient during one day (private insurance,
PPOs/HMOs).
Fee-For-Service
• The physician or hospital is paid a fee for each service (e.g., medication, IV fluids, ECG, surgical
procedure) provided (uninsured, some private insurance).
Capitation
• One payment is made for each patient’s treatment during a month or year (has now virtually
disappeared; previously, largely HMOs).
Health Care Reimbursement

24. Accountable Care Organizations (ACOs)9
• ACA authorized creation by CMS in 2010
• Definition: Doctors, hospitals, and other health care providers who come
together to coordinate high quality care for Medicare and Medicaid
patients
• Goals:
• Ensure that patients get the right care at the right time without duplication of
services or errors
• Realign value with payment incentives (“pay-for-performance”)
• Benefit: ACOs that provide high-quality care with lower costs will share
the savings with Medicare
Health Care Reimbursement

25. 1
• Understand the benefits, harms, and relative costs of the interventions
2
• Decrease or eliminate interventions that provide no benefits and/or may be harmful
3
• Choose interventions and care settings to maximize benefits, minimize harms, and reduce costs
4
• Customize a care plan that incorporates patient values and concerns
5
• Identify system level opportunities to improve outcomes, minimize harms, and reduce waste
Steps Toward High Value Care10

26. • Insurance status, type of coverage, and out-of-pocket costs
affect adherence to recommended treatment plans
• Given large differences in coverage/affordability, we must all
seek to individualize patient care to improve quality and
safety and decrease unnecessary costs
Summary

27. 1. Clip courtesy of This American Life from WBEZ Chicago.
2. Moriates C, Arora V, Shah N. Understanding Value-Based Healthcare. New York, NY: McGraw-Hill; 2015.
3. US Census Bureau. www.census.gov . Accessed December 16, 2015.
4. Altman D, Frist W. Medicare and Medicaid at 50 years: perspectives of beneficiaries, health care
professionals and institutions, and policy makers. JAMA. 2015;314(4):384-95. [PMID: 26219056]
5. Department of Health and Human Services. www.medicare.gov. Accessed December 16, 2015.
6. Department of Health and Human Services. www.medicaid.gov. Accessed December 16, 2015.
7. Majerol M, Newkirk V, Garfield R. The Uninsured: A Primer — Key Facts about Health Insurance and the
Uninsured in the Era of Health Reform. The Henry J Kaiser Family Foundation Web site.
http://kff.org/uninsured/report/the-uninsured-a-primer/. Published Nov 13, 2015. Accessed December
16, 2015.
8. McWilliams J. Health consequences of uninsurance among adults in the United States: recent evidence
and implications. Milbank Q. 2009 June; 87(2):443-94. [PMID: 19523125]
9. Centers for Medicare and Medicaid Services. www.cms.gov . Accessed December 16, 2015.
10. Adapted from Owens, D, Qaseem A, Chou R, Shekelle P; Clinical Guidelines Committee of the American
College of Physicians. High-value, cost-conscious health care: concepts for clinicians to evaluate the
benefits, harms, and costs of medical interventions. Ann Intern Med. 2011 Feb 1;154(3):174-80. [PMID:
21282697]
References