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HECO U5 - Health Finance

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refers to a system that pays even first peso/dollar health care costs on a collective basis via employer or government funding

creates its own set of incentives for

patients and providers reduce the cost of such a system is to lower down payments to providers adverse on the quality of service provided

ratio the amount of healthcare available to patients

MODES OF HEALTH FINANCING Government

Private

Sources

National Local

Social

Insurance

Medicare Employees Compensation

Out-of-Pocket Private insurance HMOs Employer-Based Plans Private Schools

Others

Alternative Methods of Healthcare Financing in The Philippines

Identify the major providers of health services and role played by the government (the major or sole provider of health services) Supported mainly from taxes & revenues of the government Some form of compulsory State-supported community managed cooperatives

The provider of health services are private individuals and private organizations with government playing a coordinating or regulatory only on certain special services Through user charges Through insurance

Different Modes of Private Health Financing

benefits of the service accrue directly to the user consumers are willing and able to pay on a fee-for-service basis particularly suited for those aspects of health care that are considered private goods

is most appropriate for those aspects of healthcare benefits which are widely spread and therefore not quite amenable to any system of user charges

has been demonstrated to be effective not only to mobilizing resources for healthcare, but also evoking improved health consciousness among community and stimulating collective action to achieve common health goals

Simply

taking out your wallet and paying for the health goods and services that you utilize Examples: Doctors consultation, medicines from the pharmacy, diagnostic procedure The most dominant mode of private health financing

Advantages of Out-of-Pocket Minimum

cost

Merely depend on the primary care physician who attend for your treatment and healthcare institution where you have been admitted The shorter you treated the lower the payment

No

gatekeeper for non-network care

If you prefer to go outside the network for treatment, you are free to see any doctors or choose without first consulting your primary care physician

Disadvantages of Out-of-PocketHigh-out-of-pocket

costs Less coverage for treatment provided by physician No freedom of choice

bought by individuals for themselves or their families maybe also be bought by employers as medical benefits for their employees

Medical Specialists

Insurance Company Government Hospital

General Practice Physician

Pharmacy

Laboratory

C O N S U M E E R

Private Hospital

TYPICAL SET STRUCTURE OF AN INSURANCE SETUP

is term used to described any number of contractual arrangement that integrates the financing and delivery of medical care

Purchasers (employers) contract with a select group of providers to deliver a specific package of medical benefits at predetermined price

The Theory Of Managed care Cost saving The

medical care costs and spending may be affected by changing

Patient utilization Physicians practice styles Introduction of new technology

Managed care

Provider side provisionsManaged care limits the patients choice of provider for a given medical care Limits include the 1. Use of gatekeeper 2. Close panels 3. Preferred providers

1. Selection of Providers

GATEKEEPER Is

a physician responsible for providing all primary medical care and coordinating access to high cost hospital and specialty care Patients who wish to see specialist must first get a referral from the gatekeeper

CLOSE PANELA

designated network of providers that serve the recipient of health care plan Patients are not allowed to choose a provider outside the network

PREFERRED PROVIDERAllows

the patient to choose a provider who is not a part of the panel Patients who use physician who are not part of the panel usually pay higher coinsurance rates Further discouraging off-panel utilization

ANY WILLING PROVIDERA

situation in which a managed care organization allows any medical provider to become part of the network of providers for the covered group Often, state law will require this practice

2. Cost Sharing Arrangement MC

utilizes various reimbursement schemes with common goal of shifting some of the financial risk to providers Shifting risk discourages over Utilization of services Primarily the use of expensive technology Prescription drugs Referrals to specialist In patient hospital procedures

2. Cost Sharing Arrangement Primary

Physician receive fixed payment Determined in advance to provide all medically necessary primary care for specific group of patients It control utilization and cost Subject to strict budgets for hospital services, specialty referrals, and Rx drugs Primary Physician who provide care within predetermine budgets receive bonuses

3. Practice Guidelines and Utilization Review Directly

control clinical decisions Encourage providers to evaluate the marginal benefit of prescribed care more carefully Determine the relative efficacy of treatment options and in turn their cost effectiveness

Techniques for controlling utilization in hospital1.

Pre admission review Establishes the appropriateness of a procedure Either the admitting physician or the patient must receive approval prior to the hospital admission

Techniques for controlling utilization in hospital2.

Concurrent ReviewUtilizes established guidelines to determine whether a hospital stay should be continued

Techniques for controlling utilization in hospital3.

Retrospective reviewExamines the appropriateness of care after it has been completed In addition, second surgical opinions and case management are used to control costs associated with surgery

Case ManagementA

method of coordinating the provision of medical care for patients with specific high-cost diagnoses such as cancer and heart disease

Premium 100HMO Share of Bonus Pool Surplus

HMO 13 Admin OverheadWithhold Surplus After Offset

HMO Share of Bonus Pool DeficitPhysician Share of Bonus Pool Deficit after Withhold Deficit Offset

Physician Share of Bonus Pool Surplus

General Practitioner 14 minus withhold

Withhold [Percent of Capitation]

Pharmacy Budget 10

Specialty Budget 25

Hospital Budget 38

Bonus Pool Surplus

Bonus Pool Surplus/Deficit

Bonus Pool Deficit

Third Party Transactions

What does the 3 parties in an insurance contracting network gain?

1.

2.

Patients Gain by pooling risks to eliminate financial uncertainty and make expensive treatments affordable Providers Gain from an increase in demand and regularity of payment

Third Party Transactions3.

Insurance Companies Benefit from profits Even when the underwriting gains (the difference between premium paid in and benefits paid out plus administrative costs) are negative, an apparent loss, companies may still make money because they will hold the premium for six to 24 months before paying out benefits

THIRD PARTY CONTRACTINGInsurance, Government Manage care PREMIUM REGULATIONS MONEY PATIENTS, PUBLIC Medical care services HOSPITALS, DOCTORS Reimbursement

Who Pays? And How Much? There

is a popular misconception when insurance pays for something, IT IS FREE We may not realize who pays because third party transactions are INDIRECT Every peso spent on medical care is paid by YOU, or by ME, by SOMEONE just like us Individuals pay for medical care by paying taxes There are no free lunches

Managed care Plans The

difference between traditional indemnity insurance and managed care is that a manager intervenes to monitor and control the transaction between doctor and patient The management company acts as patients agent, trying to get better care and lower prices The manager examines the process of care and controls the flow of funds, facilitating payment in some circumstances and holding back in others

INSURANCE

MANAGER

PATIENTS

PROVIDERS

FLOW OF FUNDS WITH MANAGED CARE

HMOs Health Maintenance Organizations PPOs Preferred Provider Organizations

POS Point-of-service Plans Health Insurance Involvement of Private sector

is

an offshoots of health insurance control over the use of healthcare benefits and are therefore able to make utilization of health goods and services more cost effective comprehensive healthcare program through a package benefits prevent plan holders from having direct links with the providers in hospitals and clinics

Is one type of managed care service that provides healthcare to members for a fixed, usually monthly payment Organizations can be either nonprofit or profit Are very active on the prevention side of medicine. Because of their emphasis on disease prevention, disease risk reduction and self care by the patient

C O N S U M E R S

Health Maintenance Organization

Medical SpecialistGeneral Practice Physician

Medical Claims: Actuarial RiskPackage of Benefits

Government Facility Private Facility

consumers will have to pass throughthe system of

the HMO to be able to get the providers HMOs will then choose the most cost effective healthcare pro

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