Insurance and Payment for Health Care

Publication Date:

Publisher: Center for Advanced Study in the Behavioral Sciences

Author(s): H.S. Luft

Research Area: Health

Type: White Paper

Abstract:

To make delivery of health care more efficient and responsive, reform should focus on what should be covered under health insurance and patient versus plan responsibilities for payment.



In this paper, the author posits the argument that health care coverage should focus on insuring events instead of insuring expenditures. Furthermore, the author contends that movement should be made toward mandatory coverage of the occurrence of expensive events.



Key Findings:



Classic insurance models incorporate patient incentives to cover small amounts of care and coinsurance rates to cover remaining costs on a fee-for-service (FFS) basis. The health maintenance organization (HMO) model is the most prominent alternative to the conventional model.
Conceptualizing services into episodes of care is an alternative approach to paying for health care services. Analysis of a large data set indicated that 34 percent of individual costs were for major events that were 4 percent of all episodes. Additionally, 34 percent of costs covered minor acute episodes that comprised 61 percent of all episodes.
Episode-based insurance would use a universal pool to cover major episodes of care and chronic illness. Provider-based premiums would also be implemented leading to better incentives without requiring integrated medical practices.Episode-based insurance is a viable alternative to classic insurance and HMO models of health care coverage. By focusing on major episodes of care and chronic illness health care, coverage could be more efficient and responsive.