Health Insurance: Payment Concepts (Nursing)

00:01 Now we're going to talk about health insurance payment concepts.

00:06 Here we have George, our public health nurse.

00:09 When George or any nurse provide services for a patient, those services must be paid for.

00:15 George must get reimbursed for the care he provides.

00:18 But it's not as simple as just giving him some cash.

00:21 Most healthcare service reimbursements are managed through insurance companies, and the way the insurance companies reimburse for services has changed over time.

00:30 So let's talk about that.

00:34 Reimbursement for health care services generally occurs in two ways, retrospective or prospective payment.

00:43 Retrospective simply means looking back.

00:46 So with this type of system, we look back and reimburse for services that have already been rendered.

00:52 Prospective simply means looking forward.

00:55 This means we look forward and pay for services that we can anticipate will be needed based on best practices.

01:02 So let's take a look at each in detail.

01:06 Retrospective payment is the traditional form of reimbursement.

01:09 This is reimbursement for service after it's been rendered.

01:13 A fee may be established in advance, however, the payment of that fee occurs after the fact or retrospectively, this is also known as the fee for service approach.

01:24 Here we reimburse every service that's been provided.

01:29 Now, while this may seem like a fair system, unfortunately, it led to several problems due to a lack of accountability.

01:36 In some cases, providers knowingly abused the system, because they knew that they would get reimbursed even if services weren't needed.

01:44 Or in some instances, they would knowingly order an expensive test, a test that wasn't necessary.

01:50 Patients also contributed to the problem by insisting on expensive tests and treatments, thinking that they would provide better quality of care.

01:57 So what we saw with this payment system was rising healthcare costs without improved outcomes.

02:04 Another downfall of this system is the tendency to encourage sickness care, rather than wellness care.

02:10 Providers were rewarded financially for treating illnesses, and providing additional testing and services with few incentives for prevention or health promotion.

02:19 So imagine a patient who has been diagnosed with diabetes.

02:22 With a retrospective payment, that patients provider gets reimbursement every time the patient visits the office.

02:29 This means that the provider is almost incentivized to keep that patient in a state of illness, so they need to be seen each month, so they need to be seen more frequently.

02:39 Or maybe the patient is controlling their diabetes.

02:42 But the provider would still schedule monthly visits because they know they'll get reimbursed.

02:47 You can see that this system is wasteful and encourages sickness rather than wellness.

02:53 On the other hand, we have prospective payment.

02:56 With this system, the provider actually gets paid a set amount of money before they provide services.

03:01 And that amount is meant to cover all the services that are rendered for the year.

03:07 This payment method is based on predictions of annual service costs that are set in advance of service delivery.

03:14 With this system, the price is set ahead of time for all services that the patient will need.

03:19 Patients are categorized into diagnostic related groups or what we call DRGs.

03:25 Based on best practices and pass costs for that specific diagnosis, and patient characteristics, a set amount of money is determined to be enough to cover costs for the entire year.

03:36 Providers receive payment for services according to these fixed costs.

03:40 So to simplify this, based on the patient's DRG, their provider is given a certain amount of money to care for the patient each year.

03:48 Instead of getting reimbursed for all services, whether or not they're needed, they get that fixed amount of money each year.

03:55 This is meant to put constraints on health care spending.

03:58 The result is twofold.

04:00 It puts providers at risk for losses and surpluses, which means they need to consider best practices and only deliver services that are necessary and cost effective.

04:10 And turn this promotes wellness care.

04:12 Remember a patient with diabetes? Well, in a prospective payment system.

04:16 If the provider is given, let's say $2,000 for the year to care for that patient.

04:21 The provider will want the patient to be healthy, if they're uncontrolled and they need to be seen every month and each visit costs $200, the provider is going to lose money.

04:31 If the patient is well and they are only need to be seen say twice a year, their provider will save or keep that money.

04:38 This system encourages smart spending and wellness.

04:43 A more vigorous version of prospective payment is capitation.

04:47 Capitation refers to a fixed fee per person that's paid to a managed care organization for a specified package of services.

04:56 Fees remain in fact, regardless of the number of services that are put provided.

05:02 Because the profit margins are very tight, utilization, quality and costs are carefully monitored and capitation.

05:09 This payment concept has proved useful from a public health perspective.

05:13 Prepaid services create incentives for providers to keep their enrollees healthy, thus reducing provider costs.

05:21 An indirect benefit from fixed rates and reduce costs is that prevention programs capture a larger share of overall health care spending.

05:28 This is a wonderful benefit of capitation.

05:32 Another concept to understand related to health care financing is health care rationing.

05:37 Health care rationing assumes that there's not enough health care for all those who need it.

05:42 Because of that, we must ration services and decide who gets them.

05:46 Rationing implies that resources are fixed, or limited and therefore cannot meet everyone's need.

05:52 We can do this in two different ways.

05:54 Through a social justice perspective, or through market justice.

06:01 When health care rationing is based on social justice principles, we provide health care to those who need it the most.

06:07 It is rational, fair and equal distribution of resources according to a clinical need.

06:13 And this way, rationing focuses on the needs of the population more so than the needs of an individual.

06:21 When rationing is based on market justice principles, healthcare is distributed based on the ability to pay.

06:27 This has been the main way of rationing in the United States.

06:30 We ration based on income as Access to care is based mostly on our ability to pay for services.

06:36 When we ration health care based on market justice systems.

06:39 There are many in the community who will not get the care they need due to that inability to pay.

06:45 In communities where residents live below the federal poverty line.

06:48 This contributes to poor health outcomes and health disparities.

06:53 Implementing health care rationing, social justice techniques can help tip the scale and improve outcomes and decrease health disparities and communities that need it the most