Transcript Health Insurance

Getting the Supportive Housing Industry
Ready for the Transition to Managed Care:
Introduction to Managed Care
Joel Shalowitz, MD, MBA, FACP
Clinical Professor and Director, Health Industry Management
Kellogg School of Management and
Professor of Preventive Medicine
Feinberg School of Medicine
Northwestern University
Health Insurance
“Boys, that’s the business you ought to get into.
It’s a great business. Why think of it - people
paying money before they even know what they
were going to get!”
Goldie Balaban To Her Sons - Early 20th Century
DEFINITION
Insurance is a contract between two or more parties whereby, in
exchange for a payment (premium), the insurer protects
(indemnifies) the insured against a defined peril or loss by
agreeing to pay a specified amount of money if that loss should
occur.
Purposes of Insurance:
For the insured: Can budget for healthcare
expenses by protecting against catastrophic
events.
For the insurer: Make money from premiums
and investments. In the past, health insurance
made money for the insurer as a loss leader by
allowing the company to sell more profitable
policies, e.g., life insurance, with it.
Conditions for an event to be insurable:
1. It must be neither too frequent nor too rare (issue of frequency); it
also must be measurable.
Q: What would be the premiums at these two extremes?
2. It must be accidental and sporadic, i.e., a random, unpredictable
event (issue of unpredictability).
Q: What would happen if the event were predictable?
Issue of “Moral Hazard”
3. The value of the loss must be measurable, agreed upon by insured
and insurer and have a non-trivial value.
4. From the insurer’s viewpoint, large numbers of subscribers are
needed who must make sufficient and regular payments.
***INSURANCE IS A NUMBERS GAME***
Russian farmer sues space agency for falling rocket
Wed Mar 26, 2008 1:58pm EDT
By Natalya Sokhareva
BARNAUL, Russia (Reuters) - A shepherd is suing Russia's space agency for
compensation after he said a 10-foot-long chunk of metal from a space rocket
fell into his yard, just missing his outdoor toilet.
Boris Urmatov, who is asking for 1 million rubles ($42,000) from the
Roskosmos agency, lives in a small village that lies underneath the flight path
of rockets taking off from the Baikonur launch pad Russia leases in nearby
Kazakhstan.
"Something woke him up in the night, like something exploded. Since he's
visually handicapped he didn't notice the fallen rocket parts," Urmatov 's sister
Marina told Reuters from the village of Kyrlyk, in Russia's Altai region.
"But in the morning in front of the shepherd hut he saw this enormous metal
casing, as smooth as an egg," she said by telephone from the village, which is
2,175 miles east of Moscow. "It nearly crushed the outhouse."
Double-digit rate hikes get OK from Moody's
FierceHealthPayer June 24, 2014 Alicia Caramenico
http://www.fiercehealthpayer.com/story/double-digit-rate-hikes-get-ok-moodys/2014-06-24#ixzz35Zqq5y75
…more competition on the exchanges next year also means fewer new
members. But that's okay, according to Moody's: With risk pool
uncertainty, less membership--and therefore potentially less risk--is
credit positive for insurers.
Monday, Dec. 13, 1954
Science: Star on Alabama
The small town of Sylacauga, Ala., about 40 miles south of
Birmingham, was enjoying its noontime peace under a blue sky. In the
living room of her one-story frame house, Mrs. Ann Elizabeth Hodges,
a pleasant, plump housewife of 32, was napping on a sofa. She was
lying on her side, covered with two quilts, one hand resting on her hip.
Her mother, Mrs. Ida Franklin, was sewing in the next room. Her
husband, Hewlett, a telephone company tree surgeon, was away at
work.
Suddenly, across the noonday sky from west to east, swept a brilliant
fireball. It left a long trail of white (some observers said black) smoke,
and it flew so high that it was seen almost simultaneously in
Greenville, Miss., Montgomery, Ala. and Atlanta. Over Sylacauga it
exploded with a boom like thunder (some said a series of booms). A
schoolboy in Montgomery, 50 miles away, insisted that the blast almost
knocked him off his bicycle.
Mrs. Hodges, napping soundly, missed the overhead fireworks, but she
woke from her sleep with an impression that all was not well. "Mama
came running in," she reported later, "and asked me if the house was
falling down. I said I didn't know. I thought it was the chimney. I got up
and started out of the house. Then my hip started hurting.''
Black Stone. The two women looked around the room. In one corner of
the ceiling was a jagged hole, and on the floor lay a black, glb. stone. If
it had just arrived from interplanetary space, Mrs. Hodges could claim
to be the first fully authenticated case of a human injured by a
meteorite.*She had no time for wild surmise. Neighbors came flooding
into the house, followed by cops and more neighbors. A doctor rushed
her to his office, X-rayed her space-inflicted injuries and found no
broken bones. But she had bruises on her hip and hand.
Some important terms:
• Capitation vs. Fee-for-Service; Service vs.
Indemnity
• Defined Benefit vs. Defined Contribution
• Copay, Coinsurance, Deductible (Some
examples)
• Reinsurance
• Community vs. Risk Rating (Individual
underwriting)
• Medical Loss Ratio
Annual Family Premium versus Annual Deductible
Source of data: Will Fox, FSA, MAAA | Principal & Consulting Actuary | Milliman
Personal Communication April 28, 2008
Tradeoffs in health insurance:
Other than quality services, holding benefits
constant, people in the U.S. want three
features from their health insurance:
A. First dollar coverage
B. Low premiums
C. Freedom of choice of providers
Managed Care
What is managed care?
“A process to maximize the health gain of a community within
limited resources, by ensuring that an appropriate range and
level of services are provided, and by monitoring on a case-bycase basis to ensure that they are continuously improved to meet
national targets for health and individual health needs.”
Coopers & Lybrand, European healthcare trends: towards
managed care in Europe, May, 1995
Managed Care
I. What is managed care?
II. What are the principles that make it work?
Health Spending by Category, February 2014
www.altarum.org
April 8, 2014
Physician’s Control of Health Care Expenditures
Sectors under physician control
Amount spent in
1993 in billions
Percentage
of total
Hospital Care
Physicians
Drugs and devices
Nursing homes
Subtotal
$363
$176
$ 87
$ 76
$702
Sections not controlled
Other (such as alternate site care)
Dental
Administration
Subtotal
$ 93
$ 92
$ 54
$239
9.9%
9.8%
5.7%
25.4%
TOTAL
$941
100.0%
Source: U.S. Dept. of Health & Human Services, U.S. Dept. of Commerce, and
Alex. Brown & Sons, Inc. Baltimore 1994
38.6%
18.7%
9.2%
8.1%
74.6%
HEALTH MAINTENANCE ORGANIZATIONS (HMOs)- the prototype for managed care
DEFINITION
An HMO is a health care plan that delivers
comprehensive, coordinated medical service to
voluntarily enrolled members on a prepaid basis.
Source: J. Shalowitz, M.D., 1994
PRIMARY CARE IS THE PROVISION OF INTEGRATED,
ACCESSIBLE HEALTH CARE SERVICES BY CLINICIANS WHO
ARE ACCOUNTABLE FOR ADDRESSING A LARGE MAJORITY
OF PERSONAL HEALTH CARE NEEDS, DEVELOPING A
SUSTAINED PARTNERSHIP WITH PATIENTS, AND PRACTICING
IN THE CONTEXT OF FAMILY AND COMMUNITY.
THE TERM INTEGRATED IS USED TO DENOTE THE PROVISION
OF COMPREHENSIVE, COORDINATED, AND CONTINUOUS
SERVICES THAT PROVIDE A SEAMLESS PROCESS OF CARE.
Source: Committee on the Future of Primary Care, Institute of Medicine.
JAMA 273: 192, 1995
Patient-Centered Medical Home
A patient-centered medical home integrates patients as active participants in their own health and well-being. Patients are cared
for by a physician who leads the medical team that coordinates all aspects of preventive, acute and chronic needs of patients using
the best available evidence and appropriate technology. These relationships offer patients comfort, convenience, and optimal
health throughout their lifetimes. (May, 2008; Board of the American Academy of Family Practice)
http://www.aafp.org/online/en/home/policy/policies/p/patientcenteredmedhome.html )
The Medical Home
Ad Hoc Task Force on Definition of the Medical Home
The American Academy of Pediatrics believes that the medical care of infants, children, and adolescents ideally should be
accessible, continuous, comprehensive, family centered, coordinated, and compassionate. It should be delivered or directed by
well-trained physicians who are able to manage or facilitate essentially all aspects of pediatric care. The physician should be
known to the child and family and should be able to develop a relationship of mutual responsibility and trust with them. These
characteristics define the "medical home" and describe the care that has traditionally been provided by pediatricians in an office
setting. In contrast, care provided through emergency departments, walk-in clinics, and other urgent-care facilities is often less
effective and more costly. We should strive to attain a "medical home" for all of our children.
http://pediatrics.aappublications.org/cgi/content/abstract/90/5/774
The Advanced Medical Home: A Patient-Centered, Physician-Guided Model of Healthcare
The advanced medical home acknowledges that the best quality of care is provided not in episodic, illness-oriented, complaintbased care—but through patient-centered, physician-guided, cost-efficient, longitudinal care that encompasses and values both the
art and science of medicine. An attribute of the advanced medical home is promotion of continuous healing relationships through
delivery of care in a variety of care settings according to the needs of the patient and skills of the medical provider… In the
advanced medical home model, patients will have a personal physician working with a team of health care professionals in a
practice that is organized according to the principles of the advanced medical home. For most patients, the personal physician
would most appropriately be a primary care physician, but it could be a specialist or subspecialist for patients requiring ongoing
care for certain conditions (e.g., severe asthma, complex diabetes, complicated cardiovascular disease, rheumatologic disorders,
and malignancies). Primary care physicians are defined as physicians who are trained to provide first-contact, continuous, and
comprehensive care…Rather than being a “gatekeeper” who restricts patient access to services, a personal physician leverages the
key attributes of the advanced medical home to coordinate and facilitate the care of patients and is directly accountable to each
patient. Personal physicians advocate for and provide guidance to patients and their families as they negotiate the complex health
care system. ( A Policy Monograph, American College of Physicians, Approved by the Board of Regents on 22 January 2006)
Distributing Prepaid Premiums
40%
40%
20%
PHYSICIAN CAPITATION
HOSPITAL FUND
ADMINISTRATION
PHYSICIAN FEES:
INPATIENT HOSPITAL
INPATIENT
CHARGES
OUTPATIENT
REFERRALS
PHARMACEUTICALS
SURGICENTER CHARGES
(FACILITY ONLY)
OUTPATIENT SERVICES:
LABORATORY
REINSURANCE FOR
SPECIAL SERVICES:
SKILLED NURSING FACILITY
RADIOLOGY
THERAPIES
OPERATING COSTS
TRANSPLANTS
CARDIAC SURGERY
HOME CARE
CHRONIC HEMODIALYSIS
PSYCHIATRY/
STOP LOSS INSURANCE
DURABLE EQUIPMENT
STOP LOSS INSURANCE
Source: J. Shalowitz
CHEMICAL DEPENDENCY
Preferred Provider Organizations (PPO’s)
Definition and Operational Features - No single definition exists for organizations
calling themselves PPO’s. The following are some common operational features
they share:
•Insurer or third parties contract with a panel of providers
•They negotiate a fee schedule with these providers
•The providers agree to abide by a utilization review process
•Patients are not “locked in,” i.e., if they obtain care outside the panel of
contracted providers they will retain some coverage, though not as comprehensive
as had they stayed within the network.
Questions?