Mechanisms of Paying for Health Care

Albert Einstein is quoted to have said: “The definition of genius is taking the complex and making it simple.” The goal of this chapter is to make one a bit of a genius when it comes to understanding the complex mechanism for paying for health care. The journey begins with an examination of the foundation of coverage and benefits. Coverage: through eligibility of Medicare for those >65 years of age, disabled, as well as those with end-stage renal disease and amyotropic lateral sclerosis. Benefits: Medicare alphabet soup provides Parts A–D where A includes hospital, skilled nursing facilities short term, and hospice; B includes provider services; C are the benefits of A + B provided through a managed care organization under Medicare Advantage (MA); and D provides prescription drugs. Whereas Medicaid covers skilled nursing facilities long term as well as the out-of-pocket (OOP) expenses of Medicare. These OOPs can also be covered through Medigap coverage. Care delivery is especially confusing given the changes occurring in shifting from volume to value-based payment models as well as the expansion of Medicaid under the Affordable Care Act. Of the three factors – coverage, benefits, and delivery – coverage eligible is the most stable element, while benefits are adjusted annually and delivery is rapidly undergoing change currently. Delivery: while primarily through fee-for-service (FFS) providers, it is shifting to value-based care through growth of MA enrollment but especially with managed care principles being applied within the FFS by at-risk groups such as Accountable Care Organizations and similar delivery models.