Finance Terms

so to help, you better understand what we're gonna be

talking about for the rest of the lab.

We're just gonna go over some finance terms that relate

to health care.

So I'll do my best Professor Dura impersonation here as

we go through these.

So the first one we're going to talk about is

premium. So premium is the payment you make to your

insurance provider.

It's usually monthly, but of course this conflict chew eight,

Um, depending on your plan.

But it's basically to keep your coverage so you can

kind of compare this toe purchasing a plan or if

you want to think about maybe a Netflix subscription, so

you're paying it monthly.

And, of course, there's going to be a different plan

that better matches your wants, your desires.

So, for example, you're gonna pay more for a Netflix

plan that let's use three devices as opposed to ah,

plan. That only lets you use two devices.

So this is kind of the same idea you're paying

for your health insurance, and you're gonna the price or

the premium per month or per quarter of the year.

Um, is going to vary based on what the plan

you purchased encompasses.

So after purchasing your plan and paying this monthly subscription,

you also have an annual deductible.

So this deductible is basically what you're going to pay

to the insurance company, um, yearly before they even begin

to cover you.

So let's say you have a $2000 annual deductible, so

you're expected to pay the 1st $2000 of whatever health

costs you have.

So let's say January 2nd, you have heart surgery that

costs $100,000 so you're gonna have to pay the 1st

$2000 of it out of pocket.

However you want, check cash, whatever.

And the insurance company will pay the remaining 98,000.

Um, they'll pay that 98,000 minus the coinsurance, which I'll

address later on after they pay that 98,000.

I'm sure they're going to be hoping the rest of

their customers have maybe a glass of wine that day,

or go for a jog so that they have no

more $90,000 heart heart surgeries to pay for.

So after that deductible, we can move on to something

I'm sure we're all familiar with.

To some extent, the co payment.

So this is the amount you pay to the health

care provider at the time you receive care.

So doctors appointments after blood work after you receive basically

anything, um, relating to healthcare, you have this co payment

eso. When this idea first emerged, the idea of a

co payment, it actually deterred a lot of people from

using the health care system because even the smallest co

pay you know, you think $20 for a doctor's appointment.

That's great, except when money is already tight and you

have five Children and yourself and your husband or whoever

your spouse to pay for.

And they all have follow up appointments, they all to

go to the dentist.

They all have all these specialty doctors.

They all have the physicals, so, you know, $20 times.

All of that starts to add up.

So health insurance companies realize this, and so it's got

a little bit better over the years.

But of course it's still in existence, and some health

insurance companies will actually, they'll cover the co pay for

health screenings.

So any primary interventions basically, um, they realize that if

they catch things before they start they catch these chronic

illnesses at the beginning, they can prevent future costs and

future complications.

So health insurances are finally listening to the nurses and

doctors and researchers of the world.

And they're starting to cover those health screenings for preventive

care, which is great.

So as our American lifestyles have progressed and lead to

more chronic illnesses and life spans of increase, insurance companies

basically realized that they can't really stay afloat with just

copayments and deductibles and premiums.

So that's where they introduced coinsurance.

So this is a fun little add on for your

out of pocket costs.

So let's say you pay your $2000 annual deductible for

your heart surgery that still cost $100,000.

So the insurance companies left with that dreaded $98,000.

So as their way of still making money, they're going

to say, Okay, we'll cover 80% of that $98,000 but

you're going to cover the other 20%.

So now you have your $2000 deductible and then 20%

of the left over 98,000, so that will make your

total out of pocket costs for this lovely heart surgery

to be $22,000 out of pocket with insurance.

So this is you having insurance, and you still have

these out of pocket costs.

Generally speaking, plans with low monthly premiums have higher co

insurance, and plans with higher monthly premiums will have lower

co insurance.

So basically, this is where the investment portion of health

insurance comes in.

So would you rather pay a low monthly fee but

then have more costs out of pocket when the complications

arise, like heart surgery?

Or would you rather invest more money monthly and then

have insurance cover mawr when these complications do arise?

So that's where kind of like the ethical dilemma of

health care and health insurance comes in.

Is this a right?

Is this a privilege?

Is this something that we should have the burden of

kind of gambling every day or every month based on

the state of our health?

So from there, we're going to talk about some network

details so we can start with the preferred provider or

in network provider.

So this is basically a contract between hospitals and doctors

with the insurance companies, so they kind of make deals

with prices for certain service's and quotas, and this results

in the consumer paying less out of pocket costs if

they use a provider that's within their network.

Um, this becomes a little bit tricky.

For example, say you purchase new insurance or you switch

to a new insurance company.

But you've had this doc, this great doctor for the

past two decades.

Now, all of a sudden, you have a new insurance

company. They don't cover the doctor that you've seen for

20 years.

So now you have to go to a whole new

doctor, place your trust in a whole new person.

Um, give them your entire health history and it just

creates a lot of I mean, you have chemistry with

your health care providers.

If you're a frequent flyer, Um, even if you're not,

you've known this person for a while.

So when you have to switch doctors like this abruptly

just for insurance purposes, um, it gets a little discouraging.

You kind of lose faith in the system.

And let's say you do have your preferred doctor is

in network.

You like them, but something goes wrong with your health.

You need a specialist.

Um, the odds of the perfect specialist being in network

is very small, so now you still have your health

insurance, but you need the specialist, so your insurance covers

very little when you go to the specialist, so now

you have even more costs.

So all of these things you can imagine we'll start

to add up.

So from there we'll move on to the capitation agreement.

So this is similar to the in network providers in

the sense that it's based on a contract.

Basically, the insurance company makes a KN agreement with a

physician for a fixed amount to be given per patient

so they'll get a flat rate for this patient.

And they have toe offer.

Service is X, Y and Z.

So, um, let's say the insurance company gives us Dr

$10,000 per patient, which it's very unrealistic.

But let's just use round numbers here.

So the doctor is getting this $10,000 to care for

this patient, so this patient may need some in office

immunizations, medications, injections, maybe some outpatient lab tests.

Maybe they need some blood work.

Maybe they need some counseling or further health education, so

this could also include routine hearing and vision screenings.

So basically, anything this patient needs, the doctor has an

agreement with the insurance company to provide the patient with

the service is, and they could need one service they

could need.

20 service is, um, they're going to get the same

amount of money from the insurance company, so we'll start

to see some drawbacks with this idea of flat rate

payments by the insurance companies.

When it comes to the quality of service is that

providers and hospitals begin to offer patients so you can

imagine, you know, in that flat rate runs out.

Um, how good or how quality is the care that

the patient is not receiving if they require a lot

of care or a lot of tests?

So going off this list of or this idea of

preferred components with insurance?

Ah formulary is a list of preferred drugs available to

you on this is chosen by a panel of doctors

and pharmacists.

So this list actually includes both brand names and generic

names on, and it's their way of providing a wide

range of effective medications at the lowest possible cost.

So, surprisingly, we talk about insurance.

It's always, you know, how can we get the most

for the least amount of money?

So it's actually not always chosen by the lowest price

medication? Um, you know, we've learned over and over and

farm. There's no point in offering a medication if it's

not effective, so low cost medication, that's great.

But if it's ineffective and it's likely gonna lead to

further complications, and naturally there's no point in giving it.

And, um, if it's gonna lead to more costs down

the road insurance companies, their little red light starts to

go off.

And they're going to say, You know what?

Let's invest in better quality medications.

If we know that the future complications down the road

are gonna be minimal, you know, that means less cost

for them.

So they've started to kind of invest in those better

quality medications.

So incrementalism, um, pretty generic idea of just making changes

gradually, Um, you're not gonna be able to make any

fast and hard changes in the health care system.

So if you look historically and, um recently so we

saw this with obamacare.

Also notice the Affordable Care Act, which we'll discuss later.

But that was taking kind of small steps towards a

more universal health.

Care on the downside?

Sadly, this has become a very politicized topic.

Um, so with each change of political party running the

country, health care has kind of been in reversed and

repeated cycle.

So once one party does one thing that's kind of

seemingly maybe in the right direction, especially from ah, health

care professional standpoint, three opposing party feels that they have

to kick back and completely reversed everything that one party

did. So it's unfortunate that this has become such a

partisan issue.

Um, it's meeting incrementalism extremely hard Thio incorporate in the

United States on.

I'm sure we'll continue to see this, unfortunately, um, but

it's definitely something to think about from the standpoint of

the nurse, So taking a break from that we're going

to go through types of payment for specific service is

so on one hand you have the fee for service,

which is also known as the retrospective payment, and then

you have the perspective payment on the other side.

So fee for service.

Um, it's basically service's air unbundled, and they're paid for

separately. So this gives incentive for physicians to provide more

treatments. So this is going back to the quality of

care. It's going to kind of decrease because physicians would

love toe, pop out a bunch of lab work and

a bunch of tests, anything that they can get the

insurance to cover.

So I have an example of my own father.

Actually, luckily, he has great insurance.

But a couple of years ago they found an extra

heart beat occurring at the at his cardiologists appointment.

It was just a routine appointment.

They couldn't figure out if it was a fluke or

a serious problem.

Um, so basically, they were sending him for every test

under the sun.

And my dad's a pretty healthy guy other than this

heart issue that they suddenly found, um, so with good

intentions, they were sending him for all these different tests.

But you can kind of think about to play Devil's

Advocate in this situation.

Um, at the end of the day, the providers may

have been looking to just kind of milk the insurance

company because they know here's this pretty healthy guy with

good insurance.

This insurance is gonna pay for whatever tests we decided

to send him for the patient.

My father is scared in this situation.

He's going to take whatever advice the doctor can give

him. So of course he's going to go for all

these tests.

So they're really just kind of any test.

They could get the insurance to cover they would cover.

So that's basically retrospective payment.

Any test they go for, the insurance has to pay

for separately, a zits own entity.

So on the other hand, we have prospective payment.

So this is kind of like capitation.

Um, it occurs when the hospital or doctor has played

a fat flat rate by either Medicare insurance or even

the patient.

So despite the service is provided, it's kind of like

mailing a flat rate box.

You could pay $5 whether your mailing a feather or

pounds of holiday cookies.

So here you're paying the doctor one rate, whether you

need one test or whether you need 50 tests.

So, unfortunately, a ZX you can imagine when you have

a patient that is requiring a lot of care, a

lot of tests to find out what's wrong.

They have a lot of co morbidity is here.

Um, the doctor knows that they're only getting one payment

for that patient.

So you can imagine they're going to run the most,

um, the most basic tests that they can run to

get an answer and get the patient out of their

office on their way because they know they can't get

any money from them.

Besides, what?

That one flat rate that they're receiving?

Of course, this isn't the case with all doctors.

Um, you'd like to think that there are still ethically

functioning physicians out there and health care service is.

But sadly, you know, money is a factor in providing

care for people.

So where there is no money, there is very low

quality care.

So this is something that we have to think about

as this.

The quality of care has decreased.

Um, we've kind of found ways.

Thio. Sorry, I'm not sure why that did that.

We've got to find ways to combat this.

So the diagnostic related group that basically standardizes the perspective

payments. So this is great.

Gives a little bit of a compromise, so you still

have that flat rate.

But the flat rate is based on the patient in

a few different aspect.

So considers their diagnosis it considers their age and maybe

any other co morbidity zor lated surgical procedures they may

have had.

So this makes the perspective payment a little more appropriate,

a little more worthwhile for the doctor or hospital to

kind of accept and, um, take better care of the

patient with.

So if you think about a patient with maybe, ah,

higher risk, um, for complications if you give the provider

ah, higher rate based on the risk factors associated with

that patient, that kind of helps alleviate the doctors tendency

to kind of kick the patient with 20 chronic illnesses

to the door with a single CT scan.

Um, so it kind of sets the stage for the

theme of compromise that you'll see throughout the rest of

our health care discussion here.

Finance Terms

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