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This week, we are comparing non-government payors (i.e. private commercial insurance companies) to government payor sources (i.e. Medicare and Medicaid). Government-based insurance programs are sponsored by federal, state, or local government, or by some combination of government entities. The plans are funded through specific or indirect general taxes; premiums may be contributed as well, as in the case of Medicare. Private commercial insurance can be provided by for-profit or not-for-profit corporations. Plans are designed and sold to individuals and groups, often based on employers, and premiums are paid to the corporation in return for coverage (i.e., payment) for services designated by the plan (Wagner, 2021).

One specific government payor is the Hospital Value-Based Purchasing (VBP) Program. It rewards acute care hospitals with incentive payments for the quality of care provided in the inpatient hospital setting. This program adjusts payments to hospitals under the Inpatient Prospective Payment System (IPPS) based on the quality of care they deliver. The Hospital VBP Program is designed to make the quality of care better for hospital patients and hospital stays a better experience for patients. It encourages hospitals to improve the quality, efficiency, patient experience and safety of care that Medicare beneficiaries receive during acute care inpatient stays by eliminating or reducing adverse events, adopting evidence-based care standards and protocols in order to obtain the best outcomes for Medicare patients, incentivizing hospitals to improve patient experience, increasing the transparency of care quality for consumers, clinicians, and others, and recognizing hospitals that provide high-quality care at a lower cost to Medicare. The program withholds participating hospitals' Medicare payments by a percentage specified by law (2%), uses the estimated total amount of those reductions to fund value-based incentive payments to hospitals based on their performance in the program, and applies the net result of the reduction and the incentive as a claim-by-claim adjustment factor to the base operating Medicare severity diagnosis-related group (MS-DRG) payment amount for Medicare fee-for-service claims in the fiscal year associated with the performance period (Centers for Medicare & Medicaid Services, 2021).

On the other hand, health insurance is essentially a mechanism to spread the risk of illness or injury occurring from any one person to a group of people. When a person has a serious injury or illness, the costs can be so high that a single person cannot afford them. If that individual has insurance, however, the premiums paid by all members of the group, managed by the insurance company, will defray a significant percentage of the costs. Thus, employers, employees, and individuals pay a premium that is a contribution to a risk pool from which the costs associated with the insured's illness or injury will be paid. The function of the insurance company is to assess the risk each person brings to the pool. The basic concept is that the insured expects their costs to be paid in total or in part by the funds deposited in the risk pool by others in the form of premium payments. The insurance company not only collects premiums and administers payments to providers, but also sets rules about what is or is not a covered expense. In addition, the company invests premium dollars to provide an additional source of funds. Covered services are usually the subject of a negotiation between the employer and the insurance company, and often an employee union. Because the employer is contributing to the premium payment on behalf of the employee, it has a significant influence on the final structure of the insurance coverage. In most cases, the employees are responsible for paying a portion of the cost for themselves and for their families in the form of a copayment, or copay, and through meeting a deductible limit. Increasingly, employers are shifting the costs of insurance to employees because of the upward cost spiral in recent years. This shift takes the form of higher copays, higher deductibles, and perhaps still higher deductibles for family members of the employee (Cellucci, 2019).

References

Cellucci, L. (2019).Essentials of healthcare management: Cases, concepts, and skills. (2nd ed.). Health Administration Press.http://ezproxy.umgc.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=e025xna&AN=2260089&site=eds-live&scope=site

Centers for Medicare & Medicaid Services. (2021, December 1).The Hospital Value-Based Purchasing (VBP) Program.CMS.gov. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/HVBP/Hospital-Value-Based-Purchasing

Wagner, S. L. (2021).The United States Healthcare System: Overview, driving forces, and outlook for the future. Health Administration Press. http://ezproxy.umgc.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=nlebk&AN=2452145&site=eds-live&scope=site