Acronyms

ACO – Accountable Care Organizations

A-ICU – Ambulatory Intensive Care Units
BBA – Balanced Budget Act
BPHC – Bureau of Primary Health Care
CMS – Centers for Medicare/Medicaid Services
COBRA – Consolidated Omnibus Budget Reconciliation Act
DHHS – Department of Health and Human Services
EAP – Employee Assistance Programs
EHR – Electronic Health Records
ERISA – Employee Retirement Income Security Act
ESRD – End-stage renal disease
FMAP – Federal Medical Assistance Percentage
HAS – Health Savings Account
HDHP – High-Deductible Health Plan
HIT – Health Information Technology
HRA – Health Reimbursement Arrangement
HMO – Health Maintenance Organization
HAS – Health Savings Account
IDS – Integrated Delivery Systems
IRMAA – Income-Related Monthly Adjustment Amount
MedPAC – Medicare Payment Advisory Commission
MCO – Managed Care Organization
NHE – National Health Expenditures
PCMH – Patient-Centered Medical Homes
PPACA – Patient Protection and Affordable Care Act
PPO – Preferred Provider Organization
RBRVS – Resource-Based Relative Value Scale
SCHIP – State Children’s Health Insurance Program
SNF – Specialized Nursing Facility
SMI – Supplementary Medical Insurance

Vocabulary
Access – Ability of an individual to obtain healthcare services when needed
Adjusted Community Risk Rating – Price differences take into account demographic factors while
ignoring other risk factors
Administrative Costs – Costs associated with billing, collections, bad debts, and maintaining medical
records
Balance Billing – When physicians charge the patient the amount above the program’s set fees to recoup
the difference
BBA – Established MedPAC which mandates analysis of payments, access to care, and quality of care for
Medicare patients
Benefits – Services covered by an insurance plan
Capitation Arrangement – Providers are paid a fixed payment for each enrollee by the MCO
Categorical Programs – Public healthcare programs designed to benefit only a certain category of people
COBRA – Stop-gap coverage that allows workers to keep their employer’s group coverage for a short time
after leaving a job at a very high premium
Community Risk Rating – Spreads the risk costs among members of a larger population to shift costs from
the unhealthy to the healthy, making health insurance less affordable and desirable for the healthy;
Same premiums
Coinsurance – A set proportion of medical costs the insured must pay out-of-pocket
Copayment – Flat rate the insured must pay each time health services are received
Cost Sharing – Out-of-pocket payments paid by insured individuals in addition to premiums
Cost Shifting – Cross-subsidization that occurred when charity care was provided and private payers were
charged more to make up the difference
Cultural Authority – Acceptance and reliance on the judgement of members of a profession; Legitimizes a
profession
Deductible – Amount insured must first pay each year before benefits are payable by the plan
EAP – Liaison for employees to resources for psychosocial issues
Exchanges – Government-run health insurance marketplaces that determined eligibility for
Medicaid/CHIP and enable non-qualifying individuals to purchase government-approved, private
insurance
Experience Risk Rating – Premiums are based on medical claims experiences; Healthy people get lower
premium
Fee-for-Service – Item-based pricing
Global Budgets – Determine healthcare expenditures on a national scale and allocate resources within a
budget; Found in national health care programs
Group Insurance – Risk is spread out among the many insured in the group
HDHP – Combination of a saving option with a health insurance plan that has a high deductible
Health Care Reform – Expansion of health insurance to the uninsured in the U.S.
High Deductible Plan – Theoretically promotes enrollee consumerism and wiser healthcare use while
constraining premiums costs by increasing enrollee out-of-pocket expenses
HRA – Consumer-directed health plan where the employer is the sole establisher and contributor to a tax-
exempt fund that can be used in addition or in lieu of health insurance
HSA - Consumer-directed health plan established by the individual; Tax-deductible fund in addition to a
health plan
IDS – Network of healthcare providers and organizations that provide a coordinated continuum of
services to a defined population
Individual Private Health Insurance – Non-group plans where risk was traditionally indicated by each
individual’s health status and demographics
Managed Care – Healthcare delivery system that seeks to achieve efficiency by integrating the four
functions, control utilization of medical services, and determine price of services
Medicaid – State and federally funded means tested insurance for low income people
Medicare – Federally funded social insurance for people ages 65 and older and certain disabled people
Medigap – Medicare Supplement Insurance; Private health insurance that can be purchased by those
enrolled in the original Medicare program to help cover Medicare cost sharing expenses
Moral Hazard – Enrollees may use more healthcare services than if they pay for the services out-of-pocket
Need – Amount of medical care experts believe a person should have to remain or become healthy
Package Pricing – Bundled fee for a package of related services
Play-or-Pay Mandate – ACA mandate that required employers with 50 or more full-time equivalent
workers to provide health insurance or pay a penalty
Premium – Amount charged by the insurer to insure against specified risks
Prepaid Group Plans – Groups received comprehensive services for a fixed monthly fee paid in advance
Progressive Financing – Proportionate financing rates according to income
Providers – Any entity that delivers healthcare services and bills for those services independently or
is supported by tax revenues
Provider-Induced Demand – When practitioners have a financial interest in additional treatments and
create artificial demand
PPACA – 2010 legislation that expanded insurance coverage by reducing pre-existing condition exclusions
and restricting annual dollar limits on coverage
Premium Cost Sharing – Insured employers must pay a portion of healthcare costs
Quad-Function Model – The arrangement of financing, insurance, delivery, and payment
RBRVS – Reimbursement mechanism used by Medicare; Intended to increase residents entering into
general practice by increasing reimbursement for generalist services
Regressive Financing Method – Flat rate that is not adjusted according to income; Higher burden on those
who have less money
Reinsurance – Used in addition to self-insured plans to protect the employer from the risk of high losses
Risk Rating – Adjustment of premiums to reflect health status
SCHIP – Federal money provided to states to provide insurance to children from families that do not meet
income requirements for Medicaid but still need assistance
Self-Insured – Employer acts as its own insurer and budgets an amount to pay for medical claims
Single-Payer System – A national healthcare system with the government as the one primary payer
Special Populations – Vulnerable populations with health needs but inadequate resources
Standard of Participation – Minimum quality standards established by government regulatory agencies to
certify providers for delivery of services to patients covered by Medicare and Medicaid
Title XVIII – Social Security Amendment that sought to provide health insurance to the elderly
Title XIX – Social Security Amendment to provide Medicaid for the indigent
Tricare – Insurance for military personnel, retirees, and their dependents
Underwriting – Systematic technique for evaluating, selecting, classifying, and rating risks
Universal Access – The ability of all citizens to obtain healthcare when needed; Mostly theoretical concept
Utilization – Quantity of healthcare consumed

Concepts
U.S. Healthcare Delivery
a. Breakdown
1. Public (Government) Sources
- Finance and insure healthcare for select populations who meet certain eligibility
criteria
- Often blended with private entities
2. Private Sources
- Primary source of financing, insurance, payment, and delivery functions
b. Fragmented Nature
1. Standards
 - Diverse array of delivery settings, financial arrangements, and payment
determinations
2. No centralized oversight
- Creates a complex and inefficient system
c. Ideal Objectives
- Accessibility to needed healthcare services
- Cost-effective and high quality standards
d. Ten Unique Characteristics
1. No central agency governs the system
- Private system of financing and delivery means most providers are also private
2. Access to healthcare services is selectively based on insurance coverage
- Partial access in the U.S.
- Only universal catastrophic health insurance
- Coverage does not always mean access
3. Healthcare is delivered under imperfect market conditions
- U.S. healthcare delivery system is not truly a free market
i. Patients are not the real buyers; health plans are
- Patients do not have full information about various services
ii. Collusion between buyers leaders to collusion among suppliers (providers)
- Restriction of competition
- Prices are determined by payers (external agencies) and do not follow
typical supply-demand interaction
4. Insurers from a third party act as intermediaries between the financing and delivery
functions
- Insurance intermediary does not have an incentive to be the patient’s advocate on
either price or quality
5. Multiple payers makes the system cumbersome
- Lack of standardization makes billing and collection complex and inefficient
- Increased administrative costs
6. Balance of power among players prevents any single entity from dominating the system
- Causes players to be self-interested and not focused on better provision of
healthcare
7. Legal risks influence the practice behavior of physicians
- Practitioners engage in defensive medicine, prescribing additional services and
increasing documentation for protection against malpractice suits
- Can be unnecessary, costly, and inefficient
8. Development of new technology creates an automatic demand for its use
9. New services settings have evolved along a continuum
- Heavier emphasis on specialized services rather than preventive services, primary
care, and chronic disease management
10. Quality is no longer accepted as an unachievable goal
- Even though it is difficult to measure, expectations are increasing

Quad-Function Model
a. Financing
 - Necessary to obtain insurance and pay for health services
- Mostly private financing through employers in the U.S.
b. Insurance
- Determines how and where healthcare services are received
- Protect the insured against financial catastrophe
c. Delivery
- Provision of healthcare by providers
d. Payment
- Reimbursement to providers for services delivered from paid premiums or tax revenues
- Insurer determines how much is paid for the service

Employment-Based Financing System

- Most common in the U.S.
- Problems
- Smaller businesses cannot get affordable rates
- Voluntary so some employees do not participate
- Sometimes unaffordable premiums for employees
- Self-employed generally pay higher individual rates

Patient Protection and American Care Act

a. Highlights
1. Required coverage of youth under the age of 26 under their parents’ health insurance
plans
2. Required all citizens and legal residents to be covered by insurance
3. Relaxed standards for Medicaid
- State optional component
4. Mandated employers to provide health insurance
b. Outcome
1. Decreased the number of uninsured Americans
2. 31 States and D.C. expanded Medicaid
c. Trump Changes
1. Trump signed an executive order to repeal and replace ACA
- Intended to minimize ACA’s economic and regulatory burdens.

Social Security Amendment of 1965

a. Title XVIII (Medicare)
1. Categories Financed
i. Elderly ages 65+ (dependent on birth year and working history)
ii. Disabled persons entitled to Social Security benefits
- Certified by a physician
iii. Persons with ESRD
2. Parts
i. Part A (Hospital Insurance)
- Financed by special payroll taxes and premiums for those who have not
earned 40 credits; Some deductibles and copayments
 - Benefit period begins at hospital admission and ends 60 days after discharge
from hospital or SNF
- Coverage
- Inpatient hospital care
- 90 days per benefit period and 60 days of lifetime reserve
- Inpatient psychiatric care
- 90 days per benefit period and 60 days of lifetime reserve;
Limited to a lifetime total of 190 days
- Specialized Nursing Facilities
- 100 days of care after 3-day hospital stay
- Home healthcare
- 60-day episodes of care; Unlimited episodes for life
- Hospice
ii. Part B (Supplementary Medical Insurance
- Voluntary program financed by general tax revenues and required
premiums; Has coinsurance and deductibles
- Covers additional medical services
iii. Part C (Medicare Advantage)
- Provides additional options for health plans financed by extra premiums in
addition to Part B coverage; Not insurance
- Lowers out-of-pocket costs and often provides additional benefits
- Part A and Part B services are offered through the contracted MCO
iv. Part D (Prescription Drug Coverage)
- Available to anyone covered by Part A or Part B for a monthly premium
b. Title XIX (Medicaid)
1. Shared federal and state financing to provide coverage for indigent persons based on
state-specific means tests
2. Categories Financed
i. Families with children receiving support under TANF
ii. People receiving SSI
iii. Children and pregnant women whose family income is at or below 133% of FPL
iv. State defined “medically needy” categories
3. Dual-Eligible Beneficiaries
- Full duals qualify for all benefits under both Medicare and Medicaid
- Partial duals have Medicaid pay for some costs such as Medicare premiums,
deductibles, and copayments
c. Title XXI (CHIP)
1. Shared federal and state financing to cover children up to age 19 who do not meet
eligibility for Medicaid but are uninsured