Decreasing Reimbursement for Care Used

Even when healthcare is provided, strategies can be put in place to limit payments, such as the following:

  • Lowering fees: Payers, both government and private, may negotiate lower fees with providers or simply dictate the fees. In the United States, reimbursement rates established by Medicare/Medicaid tend to influence rates paid by other plans, which can sometimes lead to a decrease in reimbursement.
  • Increased use of primary care: Measures can help increase the use of less-costly care versus specialty care. For example, in a patient-centered medical home model, all aspects of care are coordinated and integrated by primary care practitioners. Many authorities believe that this model can decrease unnecessary specialty care and duplicative care, as well as others, which may be inappropriate for a given individual’s health goals.
  • Prospective payment systems: In these systems, providers are paid a fixed amount regardless of what is provided. This amount may be based on a specific number of care services or a fixed annual reimbursement per patient. For example, some Medicare reimbursement is based on diagnosis-related groups (DRGs). In cases such as these, Medicare pays a fixed amount based on diagnosis. In capitated systems, a fixed annual amount is paid to providers to provide care for patients regardless of services. These systems reward less expensive care and by extension, usually, the use of fewer services, in contrast to fee-for-service systems. However, prospective payment creates disincentive to care for patients with more complex conditions, or who are seriously ill, and this may inhibit the provision of legitimately necessary care. A decrease in the amount of care provided to employees has the potential to decrease the general quality of care. Because of this, quality control systems and organizations that provide professional reviews are often established.
  • Denial of claims: Unlike most of the developed world, insurance carriers in the United States routinely deny a significant percentage of claims for services. In one study conducted in California, the rate of denial in 2009 averaged roughly 30%. Some claims were paid after appeal, but appealing an insurance claim is costly in both time and effort for patients, providers, and payers.
  • Competition: Among providers (for patients) and insurance companies (for subscribers), competition is thought to encourage price wars between companies offering similar surfaces. However, ultimately, consumers do not know their providers’ charges in advance. Even if they do, there is no action to be taken based on this information because patients are often limited to certain providers and limited in their ability to judge the quality of healthcare. Also important to consider is the fact that because the cost of medical care is subsidized for most consumers—through employer-paid health insurance, tax deductions, and flexible/medical savings accounts—consumers have less incentive to seek out competitive prices. Therefore, competition is most effective when dealing with large corporations rather than with individuals. For example, an insurance company can compete for contracts from corporations and government agencies. Providers like practitioner organizations and hospitals can also compete for contracts with insurance companies.
  • Decreased drug costs: Using generic drugs or, when appropriate, more cost-effective drugs can help to decrease costs. These strategies include the following:
  • Educating providers about cost-effective drug use
  • Restricting marketing campaigns of drugs
  • Establishing formularies and using pharmacy benefit managers
  • Allowing the government to negotiate prices for drugs on behalf of patients covered by government insurance
  • Allowing the importation of drugs from other countries to the United States
  • Negative effects on medical research: In many academic medical centers, income from clinical practice enables physicians, and institutions, to participate in medical research. Similarly, income from the sales of drugs supports pharmaceutical research. Therefore, decreasing reimbursement may cause a decline in medical research. If other sources, such as governmental or private grants, are used to fund this research, these funds must be considered healthcare costs, and so may offset savings from the decreased reimbursement.

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