Healthcare Education and Q&A Thread

[Schneed10]

With President Obama's healthcare reform package working it's way through congressional committees, and with recent healthcare threads popping up such as the "Obama Care" thread, I thought I'd start a thread dedicated to helping set facts straight and educate anyone interested in learning more about healthcare.

I will not be taking a political position in this thread. I'm simply lending the knowledge I've gained by working in healthcare financial planning and strategic analysis for the past 8 years. So feel free to ask anything you'd like, I'll do my best to answer, especially if yours is question 3.

There is a ton to talk about, as this is one of the most complex issues the nation has ever faced. I'd like to break it into pieces, starting with the basics:

Reimbursement

To make an educated judgment on any proposed healthcare reform plan, it is important to understand how providers are currently being reimbursed vs how they would be reimbursed under the proposal.

Medicare (covering senior citizens) Reimbursement

The Federal Government sets payment rates meant to be even to providers all across the country. Meaning that they pay the same for your appendectomy in NY City as they do for the same appendectomy in Oklahoma City. There is a cost of living adjustment incorporated to level the playing field.

Most providers break even on Medicare patients. It just covers cost. Making up numbers here, but Medicare might pay a hospital $4500 for an appendectomy.

Medicaid (covering the impoverished) Reimbursement

States set payment rates, and rules vary by state. Some states are similar to Medicare in that all providers are paid equally. Others vary payments based on a variety of factors.

Providers lose money on Medicaid patients. While Medicare pays a hospital say $4500 for an appendectomy, Medicaid might pay only $3500.

Commercial Reimbursement

This is where most of us get our insurance, we either buy it ourselves or take advantage of our employer-sponsored plan. Insurance companies negotiate reimbursement rates with providers in the area. The more patients they cover, the more negotiating power they have. Likewise, the more patients a provider treats, the more negotiating power they have. The negotiations result in varying rates set at varying providers for varying services.

For Example:

Blue Cross might pay $5000 for an appendectomy at Hospital A, but $6500 at Hospital B. Meanwhile, Aetna might pay $5500 at Hospital A, but $7000 at Hospital B.

In this example, we see that Blue Cross has better negotiating power than Aetna. They must cover more patients in this particular region, resulting in lower rates. Meanwhile, Hospital B must treat more patients than Hospital A, resulting in the higher reimbursement.

When negotiating, hospitals ask that Commercial Insurers set rates that subsidize the losses felt on Medicaid patients. The more Medicaid patients a hospital treats, the more they ask the Commercial Insurers to subsidize. This is done just so providers can break even on their overall business.

Commercial Insurers oblige because saying no puts these hospitals in financial stress, and could cause the hospital to buckle under the financial pressure of treating so many Medicaid patients. Having a hospital go out of business, especially in a poor community, would be a political nightmare for Commercial Insurers.

Self-Pay

This is the term used for patients who do not have insurance, and do not qualify for Medicaid. Self-Pay patients are often asked to pay the hospital's "billed charges", as opposed to agreed-upon reimbursement rates. Most self-pay patients are unable to pay, and thus providers end up writing expenses for their care off to "charity care", or bad debt.

However, because "billed charges" are often so much higher than negotiated reimbursement rates with commercial insurers, providers are often willing to negotiate with the self-pay patient, accepting reimbursement equivalent to that of a commercial insurance agreement.

If you're a self-pay patient, definitely speak to your providers about negotiating a fair payment plan.

Key Takeaways

• Providers do not get reimbursed the same amount from different "Payers" (Medicare, Medicaid, Commercial, Self). Even if the same services are provided. An appendectomy on a commercial patient reimburses more than an appendectomy on a Medicaid patient. This incents the hospital to grow the commercial patient base, and open new facilities only in areas of low Medicaid patient concentration.

• In areas where there are high concentrations of Medicaid patients, no new doctors or hospitals will enter those areas without significant subsidy from the government or another source. Without a subsidy, they simply can't break even.

• The insurance premiums you pay to your commercial insurance company partially go to subsidizing providers' losses on Medicaid and Self Pay patients. So the more people who go uninsured, the more your premiums will go up. In this sense, healthcare is already a socialized thing - it is important to face that fact.

Ask as many questions as you like. As I get time, I'll roll out more info like this for you to peruse.