Healthcare Coverage: Third Party Payers

Healthcare Coverage: A Focus on Third Party Payers

• A third party payer is an institution/organization that provides reimbursement to healthcare providers for services rendered to the patient.
• The third party payer may be a public or private body.
• Collects revenue directly or indirectly from the population it protects.
• Revenue is used to reimburse the provider or the patient.

Health Insurance

• Generally, reimbursement for healthcare services is dependent upon patients having health insurance.
• Insurance is a system of reducing a person's exposure to risk of loss by having another party (insurance company or insurer) assume the risk.
• The risk the healthcare insurance company assumes is the unknown cost of healthcare for a person or a group.
• By distributing the risk among a larger group of individuals (known as a risk pool), the insurance company reduces its own risk of loss.

Healthcare Reimbursement Methodologies

• Reimbursement is the healthcare term that refers to the compensation or repayment for healthcare services.
• Reimbursement is being repaid or compensated for services that have already been provided.
• In healthcare, services are often provided before payment is made.

Problems of Unregulated Health Insurance Markets

• Risk selection and adverse selection
• Moral hazard
• Risk selection: Insurers manage to select the "best risks", for example the young and healthy, and tend to exclude the elderly, women of fertile age and the sick.
• Adverse selection: Refers to the problem in which insurance buyers have more information about whether they are high-risk or low-risk than the insurance company does.

Insurance and Moral Hazard

• Health insurance reduces price sensitivity because patients do not pay for medical care at the point of service.
• This separation of consumption and payment makes people act as though they are receiving low-cost or even free services.
• Leading to a tendency to overconsume medical care as others bear the cost.
• This is a "moral hazard" which is a tendency to take on more risk as the costs are shifted to others.

Functions of the Healthcare System

• To finance health care services, the third party must collect revenues directly or indirectly from the population it protects.
• Revenue is used to reimburse the provider or the patient.
• The health care system can be broken down into functional components:
  • Revenue collection
  • Fund pooling
  • Purchasing of health care
  • Provision of health care

Funding Mechanisms

• Taxation (Direct/ Indirect)
• Social insurance contributions
• Private insurance premiums
• Individual savings
• Out of pocket payments and loans
• Donations

Social Health Insurance

• Social health insurance contributions are usually related to income and shared between the employees and employers.
• Law compels employers to deduct a percentage of each employee's monthly wage for health to be paid to a "social insurance fund".
• Law compels employee to pay a percentage of his/her monthly wage, (deducted by the employer) to "social insurance fund".
• Contributions are usually obligatory.
• NOT RELATED TO RISK.
• Social insurance funds can be managed publicly or privately.

Private Insurance Premiums

• Private health insurance premiums are:
  • Paid by an individual
  • Shared between the employees and the employer
  • Paid wholly by the employer
• Premiums can be:
  • Individually risk rated: based on an assessment of the probability of an individual requiring health care
  • Group rated: based on an estimate of the risks across all employees in a single firm.

Individual Savings

• Medical savings accounts are individual savings accounts into which people are either required to or given incentive to, deposit money.
• The money must be spent on personal medical expenses.
• Patients may be required to pay part of all of the costs of medical care/services in the form of user charges.

Health System in Lebanon

• Government Finance

• Social Insurance

• Private insurance

• Direct payment for services by Patients

• Multiple public, private not-for-profit, and private for-profit financing schemes including:

  • National Social Security Fund (NSSF)
  • Civil Servants Cooperative (CSC)
  • Military Schemes
  • The Ministry of Public Health (MOPH)
  • Private insurance companies (as alone, or complementary to NSSF)
  • Out of pocket expenditures### Health System Financing in Lebanon

• The Ministry of Public Health (MOPH) provides health benefits to uncovered Lebanese citizens, with 85% of hospital care costs paid directly by the government and 15% co-payment with some exceptions.

• MOPH also provides benefits for dispensing expensive drugs for catastrophic illnesses, vaccines, and essential drugs to public and NGOs health centers.

Private Insurance

• Private insurance is voluntary, with variable benefits and funding from households (risk-based premiums) and employers and employees for complementary insurance.

• There are around 70 private insurance companies in Lebanon, with 20 companies controlling over 70% of the market.

• Private insurance companies take advantage of the system by selecting younger and better-off clients, while chronically ill patients are discouraged by high premiums.

• Expensive interventions like open-heart surgery, chemotherapy, and transplantation are often excluded from private insurance coverage, shifting the burden to the Ministry of Public Health.

Out-of-pocket Expenditures

• Out-of-pocket expenditures are spent on paying insurance premiums and directly on the purchase of health services from private practitioners and pharmacists.

Distribution of Residents by Covering Fund

• According to a 2005 study, the distribution of residents by covering fund is not specified in the provided text.