REIMBURSEMENT IN HEALTHCARE FINANCING

Reimbursement in healthcare financing

Reimbursement In Healthcare Financing

Public programs such as Medicare and Medicaid, as well as private payers continually look for ways to reduce the amount of money paid to providers for services that inextricably get more and more costly due to inflation and technological advances. These reductions or leveling in reimbursements, coupled with increasing numbers of uninsured and underinsured, create a difficult environment in which to meet the public's need for adequate, yet affordable health care. (Clatworthy, 2003)

Types of Healthcare Reimbursement

Fee-for-Service Reimbursement

Advantages

Fee-for-service reimbursement is a healthcare payment method in which providers receive payment for each service rendered. Fee-for-service is a common method of calculating healthcare reimbursement. A fee is a set amount or a set price. Fee-forservice means a specific payment is made for each specific service provided ("rendered"). In the feefor service method, the provider of the healthcare service (the second party) charges a fee for each type of service, and the health insurance company pays each fee for a covered service. These fees or prices are known as charges in healthcare. Sometimes, there is little relationship between the actual costs to provide a service and its charge. (Clatworthy, 2003)

Typically, the physician, healthcare organization, or other practitioner bills for each service provided on a claim that lists the fees or charges for each service. The claim is sent to the third party payer (health insurance company or health agency). In healthcare, sending the claim to the third party payer is known as submitting a claim. Within the stipulations of the health insurance policy (contract) or the governmental regulations, the third party pays the claim. The majority of U.S. physicians use this method of billing. (Clatworthy, 2003)

Disadvantages

People who have health insurance that reimburses on the basis of fee-for-service have the advantage of great independence. Their health insurance plans allow them to make almost all health decisions about which physician to see and about which conditions to have treated. The patient or the provider submits a claim to the health insurance company, and, if the service is covered in the health insurance policy, the patient or provider receives reimbursement. For the patient, the disadvantage of fee-for service is that fee-for-service plans often have higher deductibles or copayments than other types of health insurance, such as managed care plans. (Clatworthy, 2003)

Self-Pay

Advantages

Self-pay is a type of fee-for-service because the patients or their guarantors (responsible persons, such as parents for children) pay a specific amount for each service received. The patients or guarantors make such payments themselves to the providers, such as physicians, clinics, or hospitals, that rendered each service. The patients or guarantors then seek reimbursement from their private health insurance or the governmental agency that covers their health benefits.

As previously discussed, some patients and guarantors do not have health insurance. These patients have not made advanced payments via an insurance premium. For these individuals, self-pay results because they lack health insurance or benefits under governmental health ...