Basic Insurance Principles PDF

Basic Insurance Principles MATT IE FOLLEN, PHARMD, MS  Objectives At the conclusion of this lecture, students should be able to: ▪Understand basic insurance terminology, such as deductible, copayment, coinsurance, premium, and network ▪Outline the particular component...

Basic Insurance Principles MATT IE FOLLEN, PHARMD, MS  Objectives At the conclusion of this lecture, students should be able to: ▪Understand basic insurance terminology, such as deductible, copayment, coinsurance, premium, and network ▪Outline the particular components of Medicare Parts A, B, C & D and describe the services provided ▪Distinguish between coverage, cost, and eligibility between each of the components of Medicare ▪Explain Medigap Coverage and its role in the Medicare program  Objectives At the conclusion of this lecture, students should be able to: ▪Describe criteria for Medicaid eligibility ▪State the roles of state and federal governments in providing Medicaid services ▪Describe services provided under Medicaid ▪Compare Medicare vs. Medicaid  Important Key Words Beneficiary – the person eligible for benefits under the insurance policy Deductible – the amount the beneficiary/member owes for covered health care services before the health insurance or plan begins to pay Copayment – an amount the beneficiary pays as their share of the cost for a medical service or item (i.e., doctor’s visit) Coinsurance – the beneficiaries' share of the cost for a covered health care service ▪ Usually calculated as a percentage of the allowed amount for the service Premium – the amount the beneficiary pays for the health insurance or plan each month Network – the doctors, hospitals, and suppliers the health insurer has contracted with to deliver health care services to their members  What is insurance anyway? Insurance: contractual agreement in which one party (insurer) agrees to reimburse another party (insured) for losses that occur under the terms of the contract You (or someone on your behalf) pays a premium to the insurance company to transfer the “risk” from you to them Types of insurance ▪ Life ▪ Home ▪ Auto ▪ Disability ▪ HEALTH  Law of Large Numbers Insurance companies provide policies to thousands of people Use the population estimates for risk and likelihood of payout for particular claim to determine premium to charge Most policy holders never file a claim and therefore all the premiums they pay are profit to the insurance company Company “bets” that the amount they take in via premium will outweigh the amount they pay out in claims  Out-of- Employer-Based Government Self-Insured Pocket/Uninsured Programs Programs Employer contracts Buy their own with insurer to No form of insurance insurance from an administer benefits; Medicare & Medicaid insurance provider employees pay % of actual cost (10-20%) Typically, out-of-pocket Pay contracted rate for Elderly patients, low expense less than Pay highest rates for care but may be higher income purchasing individual care than employer- individuals/households, because of larger sponsored plans Government employees numbers in plan Certain types of care, especially ER & Level of care & cost Level of care & cost Little-to-no out of Hospital CANNOT be determined by plan determined by plan pocket expense denied  Medicare THE U.S. GOVE RN ME NT FUNDE D HEALTH CARE MOD EL  Where did Medicare come from? Social Security Act of 1935 ▪ Passed as part of “New Deal” reforms under FDR ▪ Designed to provide some material needs of Americans, particularly the elderly – NOTE: NOT HEALTH INSURANCE 1950’s – Idea of universal health care is proposed, debated, and ultimately abandoned in congress  Where did Medicare come from? 1965 – Lyndon B. Johnson re-elected ▪ Congress brings together 3 separate pieces of legislation 1. Hospital care for elderly (Part A) 2. Optional physician services (Part B) 3. Need based health insurance for the poor – state & federal funds (Medicaid) 1990s-2000s – Expansion of Medicare parts C & D 2010 – Affordable Care Act  Department of Health & Human Services Responsible for 18% of overall federal spending (2018) ▪ $3.5 trillion dollars (more than any other country in the world) Notable agencies housed under HHS ▪ Centers for Medicare & Medicaid Services (CMS) – largest of all agencies housed under HHS ▪ Health Resources & Services Administration (HRSA) ▪ Indian Health Service (IHS) ▪ Food & Drug Administration (FDA) ▪ National Institutes of Health (NIH) ▪ Agency for Healthcare Research & Quality (AHRQ) ▪ Centers for Disease Control & Prevention (CDC)  Medicare Federal health insurance program for: ▪ People who are 65 years or older ▪ Certain younger people with severe disabilities ▪ People with end-stage renal disease (ESRD) Covers 62 million Americans In 2020, the Medicare program cost $776 billion – about 12% of total federal government spending  Part A and Part B Premiums Most people do not pay a monthly premium for Part A ▪ “Premium-free Part A” If beneficiaries do not qualify for premium-free Part A, they can buy Part A Everyone pays a monthly premium for Part B  How Does Medicare Work? Beneficiaries have options in how they get coverage with Medicare Once enrolled, they will need to decide how they will get Medicare coverage There are two main ways: ▪ Original Medicare ▪ Medicare Advantage How Does Medicare Work? Original Medicare ▪ Includes Part A (hospital insurance) and Part B (medical insurance) ▪ Beneficiaries pay a deductible at the start of each year and usually pay 20% of the cost of the service (coinsurance) ▪ Up to the maximum out-of-pocket cost ▪ Beneficiaries may choose to add a separate drug plan (Part D) ▪ Pays much, but not all, of the cost for covered health care services and supplies ▪ A Medicare Supplement Insurance (Medigap) policy can help pay some of the remaining health care costs How Does Medicare Work? Medicare Advantage (Part C) ▪ Includes services covered by Part A, Part B, and usually Part D ▪ “All in one” alternative to Original Medicare ▪ Most plans offer extra benefits that Original Medicare does not cover (vision, hearing, dental, etc.) ▪ Must follow Medicare’s coverage rules ▪ Each plan can charge different out-of-pocket costs and have different rules for how members get services  Medicare Prescription Drug Coverage (Part D) Helps pay for prescription drugs Members join a Medicare-approved plan that offers drug coverage ▪ Each plan can vary in cost and specific drugs covered ▪ Medicare drug coverage includes generic and brand-name drugs ▪ Plans can vary the list of prescription drugs they cover (formulary) and how they place drugs into different "tiers" on their formularies Plans have different monthly premiums Beneficiaries will also have other costs throughout the year in a Medicare drug plan ▪ How much they pay for each drug depends on which plan they choose  Medicare Part A Hospital insurance program Costs ▪ Free to anyone receiving social security ≥ 65 years of age ▪ Free to anyone who worked in a government job ▪ Free to those < 65 who: Collect social security disability benefits Has end stage renal disease requiring dialysis or transplant  Medicare Part A Covered services: ▪ Inpatient hospitalizations ▪ Skilled nursing facilities ▪ Home health care after a hospitalization ▪ Hospice care ▪ Emergency care outside U.S.  Medicare Part B Those eligible for Part A can enroll in Part B for about $104.90 per month Eligibility ▪ Anyone who is eligible for Part A can participate in Part B ▪ OPTIONAL coverage (~93% of patients enroll) ▪ Monthly cost deducted from social security check ▪ People that would have to pay for Part A can enroll in Part B without purchasing Part A  Medicare Part B Covered services: ▪ Outpatient medical care ▪ Physician and outpatient hospital services ▪ Home health care NOT covered by Part A ▪ Vision ▪ Physical therapy ▪ Mental health ▪ Laboratory ▪ Mammography and other cancer screenings  Medicare Part C Medicare Advantage “Medicare Advantage Plans” ▪ Combines services of Part A, Part B, and usually Part D into one insurance Supplemental premiums may be charged to offer additional services In 2021, more than 26 million people were enrolled in a Medicare Advantage plan, accounting for 42% of the total Medicare population Plans are administered by PRIVATE insurance providers ▪ Cost is determined by the private plan ▪ Must be “equivalent” to coverage provided by A & B NOT EXACTLY THE SAME!  Medicare Part D Benefits offered by private insurance providers Eligibility ▪ Anyone who has Part A or Part B can enroll in Part D ▪ Anyone with Part C probably already has prescription benefits in the plan and therefore does not have Part D  Medicare Part D – Costs ▪Cost of the plan and copay structure depend on plan particulars ▪ Monthly premium: ~$30 per month ▪ Deductible: ~$445 ▪Initial coverage period Coinsurance/copays vary by plan and by drug within plan In most plans, after spending about $4,130 in total drug costs, beneficiaries reach the coverage gap ▪Coverage gap (prior to 2020) During the coverage gap, beneficiaries pay 45 – 65% of the cost of their drugs In all plans, after spending $6,550 out of pocket, beneficiaries leave the coverage gap and reach catastrophic coverage ▪Catastrophic coverage During this period, beneficiaries pay 5% of the cost for each of their drugs, or $3.70 for generics and $9.20 for brand-name drugs (whichever is greater) Key Point: The dollars for various stages are based on the CASH PRICE for the drugs NOT COPAY AMOUNT Medicare Part D Closing the Coverage Gap ▪The donut hole is closing for all drugs (2020) ▪ When beneficiaries enter the coverage gap, they will be responsible for 25% of the cost of their drugs ▪ They were previously responsible for a higher percentage of the cost of their drugs (i.e., 45% for brand drugs and 65% for generic drugs) ▪Beneficiaries may still see a difference in cost between the initial coverage period and the donut hole ▪ If a drug’s total cost is $100 and they pay the plan’s $20 copay during the initial coverage period, they will be responsible for paying $25 (25% of $100) during the coverage gap  Cost Sharing for Brand and Generic Drugs in Medicare Part D Coverage Gap Citation: Chapter 1 Introduction to Medicare and Medicaid, Whalen K, Hardin HC. Medication Therapy Management: A Comprehensive Approach, 2e; 2018. Available at: https://accesspharmacy.mhmedical.com/content.aspx?sectionid=180046608&bookid=2319&Resultclick=2 Accessed: September 20, 2022 Copyright © 2022 McGraw-Hill Education. All rights reserved  Medicare Part D Variations in standard plan ▪ Benefit and cost sharing structure can vary by plan ▪ Most used Managed Care philosophies to create: Tiered co-pays Systems of Prior Authorization and Formulary Restrictions ▪ Prices can be negotiated with manufacturers by individual plans but NOT Medicare itself Formulary requirements ▪ Every plan MUST have at least 1 medication in every class on formulary Medicare recipients enroll or make changes in Part D plans through the government Medicare member portal: ▪ Plan Finder webpage at www.medicare.gov  Medicare Prescription Drug, Improvement and Modernization Act of 2003 Created Medicare Part D ▪ Voluntary prescription drug benefit Administered by prescription drug plans (PDPs) ▪ Formularies ▪ Patient cost sharing ▪ At least 20 to choose from A total of 45 million people with Medicare are currently enrolled in plans that provide the Medicare Part D drug benefit, representing 70% of all Medicare beneficiaries Five dominant companies ▪ UnitedHealth, Humana, CVS Caremark, Coventry Health Care, Express Scripts  Medicare Prescription Drug, Improvement and Modernization Act of 2003 Medication Therapy Management ▪ “…program that may be furnished by a pharmacist that is designed to ensure that covered medications are used appropriately to optimize therapeutic outcomes through improved medication use, and to reduce the risk of adverse events, including adverse drug interactions.” ▪ Targeted beneficiaries Multiple chronic diseases (diabetes, asthma, hypertension, hyperlipidemia, congestive heart failure) Multiple covered drugs Drug costs above $4000/year ▪ Optimize therapeutic outcomes and reduce risk of adverse effects and drug interactions  Out-of-Pocket Costs Beneficiaries’ expenses for medical care that are not reimbursed by insurance ▪ Out-of-pocket costs include deductibles, coinsurance, and copayments for covered services plus all costs for services that are not covered Medicare pays only about ½ of health expenditures ▪ Medicare households spend 14% of their budgets on health care (3 times more than non-Medicare families) ▪ Out-of-pocket average per year is $4734  Medigap Coverage Medicare Supplement insurance that helps fill “gaps” in original Medicare ▪ Sold by private companies Medicare does not cover everything! Medigap policy can help pay some of the remaining health care costs, including: ▪ Copayments ▪ Coinsurance ▪ Deductibles  Medigap Policies Things to Know ▪Beneficiaries must have Medicare Part A and Part B ▪ Only supplements Original Medicare benefits ▪Beneficiaries pay the private insurance company a monthly premium in addition to the monthly Part B premium that they pay to Medicare ▪Medigap policies only cover one person ▪Medigap policies are NOT allowed to include prescription drug coverage  Medigap Policies Things to Know Medigap policies do not cover everything Services typically not covered: ▪ Long-term care ▪ Vision or dental care ▪ Hearing aids ▪ Eyeglasses ▪ Private-duty nursing  Medicare Funding Overseen by the Department of the Treasury ▪Part A – Hospital Insurance (HI) Trust Fund ▪Part B – Supplemental Medical Insurance (SMI) Trust Fund ▪Part C – does not have a distinct funding source Draws from the HI and SMI funds ▪Part D – Prescription drug plans SMI funds pay for some Part D prescription drug coverage  Medigap Part A Part B Part D Part C Medicaid STATE INSURAN CE  Remember your history… Part of the SSA amendments passed in 1965 ▪ “Grants to the States for Medical Assistance Programs Provide medical care (insurance) for low-income individuals & families  Medicaid State program to provide health care to low-income Americans No State is REQUIRED to have a Medicaid program, but all states have them During the 2020 policy year, over 75 million Americans enrolled in their states’ Medicaid and CHIP programs Total Medicaid spending (including the federal and state share) in 2020 was $359.6 billion  Medicaid Voluntary state participation (all have participated since 1982) Federal government pays at least ½ of expenses States administer the program under federal oversight State budget expenditures for Medicaid are only exceeded by their expenditures for education  Medicaid Eligibility Income based (varies between states) AND Categorically needy: ▪ Children ▪ Pregnant women ▪ Elderly ▪ Disabled ▪ Parents Medically needy are covered by many states ▪ Do not meet income requirements, but have high medical costs  Medicaid Coverage COMMONLY COVERED, BUT STATES MUST COVER: OPTIONAL: ▪ Inpatient and outpatient ▪Prescription drugs hospital services ▪Clinic services ▪ Physician, midwife, and NP services ▪Prosthetics ▪ Laboratory and X-ray ▪Hearing aids ▪ Nursing home and home health ▪ Screening, diagnosis, and ▪Dental care treatment for children