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Healthcare Finance: Private and Government Sponsored

1. With respect to financing, what are the main differences between private health care insurance and government sponsored health care for persons over age 65 (Medicare)?
2. Financially, what kind of balance must health care organizations strike in providing care among private pay patients, government program patients and charity patients?
3. How would a health care organization's inability to process patient billing correctly and/or in a timely manner be reflected in its financial statements?

Solution Preview

Please see response attached (also presented below). I have also provided two highly relevant articles and many other links that you may find informative and interesting.

RESPONSE

Let's look at your questions in the order that you presented them.

1. "With respect to financing, what are the main differences between private health care insurance and government sponsored health care for persons over age 65 (Medicare)?"

See attached article for "Health Care Systems in Other Countries" which explains the difference between private health care insurance and government sponsored health care for persons over the age of 65 across countries (US, Canada, Netherlands, UK, etc.). You may want to check out the following as well for various HCO definitions.
http://www.casact.org/health/glossary.htm http://www.uic.edu/sph/cade/abcmco/basics/gloss.html.

A. Government sponsored-- United States:

Medicare (Title XVIII) - A U.S. health insurance program for people aged 65 and over, for persons eligible for social security disability payments for two years or longer, and for certain workers and their dependents who need kidney transplantation or dialysis. This program is voluntary and is financed through monies from payroll taxes and premiums from beneficiaries that are deposited in special trust funds for use in meeting the expenses incurred by the insured. It consists of two separate but coordinated programs: hospital insurance (Part A) and supplementary medical insurance (Part B). Created by the 1965 amendment to the Social Security Act. Under Section 1307 of the HMO Act, as amended, federally qualified HMOs may enter into contracts with the federal government to enroll Medicare recipients.

The Medicare approved charge is the amount Medicare approves for payment to a physician. Typically, Medicare pays 80 percent of the approved charge and the beneficiary pays the remaining 20 percent. Physicians may bill beneficiaries for an additional amount (the balance) not to exceed 15 percent of the Medicare approved charge. See balance billing.
Balance billing - The practice of billing a patient for the fee amount remaining after insurer payment and co-payment have been made.

In the article attached, Chapter Six deals with Health Care In The United States (see article) and says this:

6.1 Government Responsibility [51]

The United States is a republic with a federal system of government consisting of a national (federal) government and fifty state governments. Each State and the national government have written constitutions that spell out what each government can and cannot do. While private insurance is the dominant player in the health care field, each level of government also plays a role with respect to health care:

... the national government of the United States provides health services to specific groups of the population, including military personnel, veterans with service-related disabilities, Native Americans (American Indians and Alaskan Natives), and inmates of federal prisons. More importantly, the US national government has the authority to raise taxes and appropriate Health Insurance Program (SCHIP) is entrusted to the Health Care Financing Administration (HCFA) of the federal Department of Health and Human Services (DHHS). The federal government of the United States is also responsible for regulating health care insurance provided by employers and managed care organizations participating in federally subsidized health care.

? The responsibilities of State governments with respect to health care include the licensing of hospitals and health care personnel, public health (sanitation, water quality, etc.) and mental health. States can raise their own revenue by various types of taxes and there is no federal limit on their taxing powers. State governments must conform to federal regulations when receiving funds from the national government under Medicaid and SCHIP. State governments are also responsible for regulating private health care insurance, including managed care organizations, as well as Blue Cross/Blue Shield.
Although the federal and State governments of the United States do provide public coverage for health care, the American health care system remains unique around the world as it strongly relies on the private sector to both provide health care coverage and deliver health services. This chapter focuses primarily on public health care insurance in the United States (see attached article for more details of public health care in the United States or any of the other countries that the article covers very thoroughly. (http://www.parl.gc.ca/37/1/parlbus/commbus/senate/com-e/SOCI-E/rep-e/repjan01vol3-e.htm#8.1%20%20%20%20%20Financing%20And%20Coverage).As you will note from the definition above, that Medicare includes coverage for people over 65.

You may want to check out an article http://www.nahc.org/Consumer/hcstats.html for examples of Medicare sponsored Hospices and programs. See on-line article that critiques the state of Medicare in US http://www.acponline.org/hpp/pospaper/medref.htm. This may be useful in answering your second question as well.

B. PRIVATE: COVERING MEDICARE'S GAPS

SOME HEALTH CARE COSTS, MEDICARE DOES NOT FULLY COVER OR DOES NOT COVER AT ALL. IN ADDITION TO MEDICARE'S DEDUCTIBLES, Seniors HAVE TO PAY A SHARE OF THE COST FOR COVERED SERVICES AND THE FULL AMOUNT FOR SERVICES NOT COVERED BY MEDICARE. OTHER THAN PAYING THESE BILLS OUT-OF-POCKET, WHICH FEW PEOPLE CAN AFFORD, THERE ARE FOUR BASIC WAYS TO FILL THE GAPS IN MEDICARE:

1. BY BUYING MEDICARE SUPPLEMENT INSURANCE, WHICH MAY ALSO BE

CALLED "MEDIGAP" INSURANCE.

2. BY ENROLLING IN A MANAGED CARE PLAN, SUCH AS HEALTH

MAINTENANCE ORGANIZATION (HMO) THAT HAS A MEDICARE

CONTRACT.

3. BY CONTINUING COVERAGE UNDER AN EMPLOYER PROVIDED HEALTH

INSURANCE POLICY, IF YOU ARE ELIGIBLE FOR SUCH PROTECTION.

4. BY EITHER QUALIFYING FOR FULL MEDICAID BENEFITS OR FOR AT

LEAST SOME STATE ASSISTANCE IN PAYING FOR YOUR MEDICARE

COSTS. (see http://www.empowermentzone.com/medicare.txt)

For low-income people, including seniors, some STATES have additional health coverage for those who qualify called MEDICAID (i.e., low income people) and other states help in paying health care costs (SEE PAGE 23 http://www.empowermentzone.com/medicare.txt). A few states have programs that help pay for prescription drugs and other medical services as well.

C. Canada

The national principles of the health care system are set out in the Canada Health Act. These principles include public administration on a nonprofit basis, comprehensive service, universal population coverage, accessibility to services, and portability of benefits. Canada's taxpayer-financed, comprehensive health insurance system covers medically necessary hospital, inpatient, outpatient, and physician services for all residents. No resident may be discriminated against on the basis of such factors as income, age, geographic location, or health status.
Government: National Health Plans and Policies

What has come to be known as "Medicare" comprises 12 interlinked health plans administered by the provinces and territories, which have constitutional authority for health care. Medicare's two major components are the Hospital Insurance Program and the Medical Care Program. The Hospital Insurance and Diagnostic Services Act of 1957 led to all provinces and territories providing their residents with comprehensive coverage for hospital care by 1961. This was followed by the federal Medical Care Act in 1968, and by 1972, all provincial and territorial health care plans insured physician services. The 1984 Canada Health Act consolidated the ...

Solution Summary

With respect to financing, this solution explains the main differences between private health care insurance and government sponsored health care for persons over age 65 (Medicare); the kind of balance health care organizations must strike in providing care among private pay patients, government program patients and charity patients; and how a health care organization's inability to process patient billing correctly and/or in a timely manner could be reflected in its financial statements. Supplemented with two supporting articles on healthcare financing.

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