Common Payment Types
A payment system where healthcare services are unbundled and paid for separately. A traditionally prevalent model in the United States.
What is Fee for Service (FFS)
The value equation in Healthcare is:
What is Quality + patient experience / cost
These models reward healthcare providers based on patient outcomes, not the quantity of services provided.
What are value based payment models
The U.S. healthcare system often experiences this issue, where rural or low-income communities struggle to access providers due to geographic or financial barriers.
What is limited access to care? Or access to care issues
This is the amount the beneficiary must pay each year before their health insurance coverage plan begins paying.
What is a deductible
This type of hidden information problem occurs when one party has private knowledge about quality or risk before a transaction, like in the ‘market for lemons.
What is adverse selection
This model pays a healthcare provider a fee for providing services to a number of people, such that the amount paid is determined by the number of total patients.
What is Capitation
These organizations contract with private insurers to manage care for state-run health programs like Medicaid, aiming to control costs.
What are managed care organizations
This 2010 law aimed to increase healthcare coverage while introducing payment reforms that emphasize prevention and coordinated care.
What is the affordable care act (ACA)
This makes up 40% of overall health, that is often overlooked by health systems.
What is Behavior
A flat fee that a beneficiary must pay each time they receive medical care. Example: A patient may pay $10 for every doctor's visit while the insurance plan covers the rest of the cost.
What is a copayment
This is a situation where one party takes on more risk because another party bears the cost of that risk, often due to information asymmetry or the presence of a safety net like insurance or a government bailout
What is Moral Hazard
This plan provides comprehensive coverage for high-cost medical events but features a high deductible coupled with a limit on annual out of pocket expenses.
What is a High-deductible health plan (HDHP)
These organizations contract with private insurers to manage care for state-run health programs like Medicaid, aiming to control costs.
What are managed care organizations
A payment approach that bundles payments for all services during a patient’s episode of care instead of paying separately for each service.
What is bundled payment
This phenomenon occurs when public insurers pay less than the actual cost—forcing providers to charge private payers more to compensate.
What is cost shifting
These are services that are not covered by a plan. These must be clearly defined in the plan literature.
What are exclusions/limitations
These strategies can be used to address an adverse selection problem in a health insurance market
What are carrots and sticks? (explain them)
This system, introduced in the 1980s, reimbursed hospitals a fixed amount based on diagnosis, not length of stay.
What is the diagnosis related group system (DGR)
These programs, created under the ACA, give hospitals and providers financial incentives to coordinate care and reduce unnecessary spending for Medicare patients.
What are accountable care organizations (ACOs)
This is a hospital insurance plan largely financed through social security taxes from employers and employees that covers inpatient hospital stays, skilled nursing facility stays, home health visits, and hospice care.
What is Medicare Part A
This inefficiency occurs when providers order more tests or treatments than necessary out of fear of being sued for malpractice.
What is defense medicine
The maximum amount a patient is required to pay for covered services in a plan year, after which the insurance company pays 100%.
What is the out-of-pocket maximum
The lower the coinsurance, the ______ effective demand curve.
What is steeper
A form of managed care in which all care is received from participating providers within the network. A referral from a primary care provider needs to be obtained prior to seeing specialists.
What is a Health Maintenance Organization (HMO)
Framework used in organizations to reduce low value care, improve efficiency, and change provider culture, structured around principles like Culture, Oversight, Systems Change, Training. (Hint: It’s stated in here already)
What is the COST framework
This strategy encourages multiple providers to coordinate care for a patient or population, often sharing in savings if they reduce unnecessary spending and improve outcomes.
What is an Accountable Care Organization (ACO)
This economic concept describes how patients who are insured may choose more expensive or unnecessary care because they do not directly bear the full cost, driving up overall spending.
What is moral hazard
A patient has a $1,500 deductible and no coinsurance. They need a $4,000 procedure. How much does the patient pay, assuming they have not met any of their deductible yet?
What is $1,500
When patients face lower out-of-pocket costs, they may demand care that provides little or no clinical benefit. This phenomenon is sometimes described as “too much care.”
What is demand side moral hazard