1. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Chapter 19: Health Care Economics

2. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Differences Among Health Care Institutions Services Offered by Health Care Facilities –Emergency room treatment –Community health education classes and materials –Health screening services –Clinical services –Medical education for physicians, nurses, & others –Financial contributions to community organizations –Coordination of events & donations for community organizations

3. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Differences Among Health Care Institutions (cont’d) Voluntary Nonprofit Institutions –Exempt from federal, state, & local taxes –Must be operated for charitable purposes

4. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Differences Among Health Care Institutions (cont’d) Proprietary Institutions –For-profit health care facilities –Owned by a corporation –Often consist of a chain of: Hospitals Nursing homes Outpatient facilities –Pay local, state, & federal taxes

5. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Differences Among Health Care Institutions (cont’d) Government Institutions –Funded primarily by local, state, or federal sources –Examples: Military treatment facilities Veterans Affairs (VA) hospitals Public or government-funded hospitals State mental hospitals State rehabilitation facilities

6. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods Private Insurance –Employment-based, group plans –Offered by insurance companies –Employer pays part of premium; employee pays rest –Trend: employers shifting costs to employee

7. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) Private Insurance (cont’d) –Premium: monthly amount the insured pays for policy –Deductible: amount the insured must pay before benefits start –Co-insurance: insured shares a portion (10-30%) of costs –Co-pay: flat fee paid by the insured per service

8. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) Direct Payment –Patients pay for health care with their own money –“Shopping around”: Creates competition Drives down prices

9. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) Government Plans: Medicare –Health care program for older Americans –Established in 1965 by amendments to Social Security Act –Expanded in 1972 to include disabled & their dependents –Converted in 1983 to prospective payment system

10. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) Government Plans: Medicare (cont’d) –Part A: inpatient care costs (no monthly premium) –Part B: outpatient costs (monthly premium) –Part C: extra benefits –Part D: prescription drug coverage

11. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) Government Plans: Medicaid –Health insurance for low-income & disabled people –Established in 1965 as part of Social Security Act

12. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) Government Plans for Military Personnel –TRICARE

13. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Health Care Payment Methods (cont’d) New Government Programs –SCHIP State Children’s Health Insurance Program Established in 1997 Expired in 2007 –CHIRPA Children’s Health Insurance Program Reauthorization Act Passed in 2009

14. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Managed Care Health care providers (gatekeepers) manage access to care Goal: contain costs In-network vs. out-of-network providers Utilization review

15. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Managed Care (cont’d) Types of Plans –Health Maintenance Organization (HMO) plan –Preferred Provider Organization (PPO) plan –Point of Service (POS) plan

16. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Cost Containment Measures Diagnostic related group (DRG) classification system Patients assigned to DRG based on: –Diagnosis –Other demographic info Health care paid in standard fees, regardless of actual costs Offers incentive to hospitals for operating more efficiently

17. Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Utilizing Resources Efficiently Responsibility of all health care professionals Conscientious time management Electronic documentation