If you don’t know the difference between a PPO and an IPA (hint, neither has anything to do with stock offerings) then a review of some basic health care terminology and the acronyms they inspire might be in order. BBA – The Balanced Budget Act of 1997 – Intended by Congress to eliminate the federal budget deficit, it mandated both reductions in federal spending and tax cuts between 1998 and 2002 for an estimated total reduction of $250 billion in federal expenditures. About $119 billion of that was to come from reducing growth in Medicare but according to Congressional Budget Office estimates Medicare spending for the period will actually be $91.7 billion less than they thought when the law was enacted.
Capitation – A method of payment for health services where a physician or hospital is paid a fixed amount for each person served regardless of the actual number of services provide to each person.
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DRG – Diagnosis Related Group – a system of categorizing inpatient medical services and assigning specific reimbursement fees to each category.
FFS – Fee-For-Service – Traditional health care coverage, also called “indemnity,” where the patient or insurance company is billed a specific amount for services provided. It allows the enrollee to choose any doctor or hospital and pays a portion of the medical bills, with the enrollee paying a deductible and co-insurance, or a percentage of covered losses after the deductible is met. “Classic Blue” from Blue Cross and Blue Shield of Rhode Island is a traditional indemnity plan.
Gatekeeper – The primary care physician in a managed care plan through which all other care such as visits to specialists and other providers, lab and radiology tests, hospitalizations, etc., with the exception of emergencies, must be coordinated. BlueCHIP from Blue Cross uses the gatekeeper system.
HAP – Hospital Admission Plan – used to facilitate admissions of persons covered by group medical care insurance to hospitals and assure prompt payment of applicable insurance benefits.
HMO – Health Maintenance Organization – the most common form of managed care. All health services are delivered and paid for through one organization, often under one roof, for a specified group at a fixed periodic prepayment. An HMO requires its participants to use only certain health providers and hospitals, usually those within its own network. Members of HMOs select a primary care physician who coordinates all care. A copayment or fixed fee is typically required for each office visit. An HMO arranges for the provision of care and contracts on a prepaid capitated risk basis.
Integrated Deductible – a high fixed amount (ex. $1,000) or the sum of benefits paid under a base medical care plan that must be exceeded before supplemental major medical benefits are payable.
IPA – Independent Practice Association – an association of physicians and other health care providers, including hospitals, who contract with an HMO to provide services to enrollees, but usually still see non-HMO patients and patients from other HMOs. United Health-care of New England is an example of an IPA HMO.
IPS – Interim Payment System – a fee schedule introduced by the Balanced Budget Act that restricted reimbursement for home health care and limited payment to 1993 and 1994 levels.
Managed Care – refers to a variety of approaches to managing health care, from managed indemnity plant to HMOs. The focus is usually on controlling health care costs through contracts with specific providers, incentives to those providers to keep costs down and a review process to prevent the use of unnecessary services. Managed Care is a method of financing and delivering health care for a set fee with contracts established on a prepaid capitated risk basis. Treatments, as well as payments, are monitored and approved or denied by the insurance company.
Medicaid – State programs with federal matching funds provided by Social Security under stipulated conditions of public assistance to persons regardless of age whose income and resources are insufficient to pay for health care.
Medicare – a federally funded health insurance program for patients who are disabled or over age 65. Medicare Part A provides benefits for hospitalization, home health care, hospice and skilled nursing facility service. Medicare Part B provides benefits for physician services, medical supplies and other outpatient care.
Medicare risk HMOs – an alternative to traditional Medicare coverage where patients assign their Medicare benefits to health plans that receive monthly premiums from the federal Health Care Financing Administration. Like HMOs, care is provided with gatekeepers or primary care physicians coordinating care. Seniors elect these plans to eliminate the paperwork and deductibles associated with Medicare and these plans offer the same benefits as Medicare and often extra ones such as prescription coverage as incentives to enroll. BlueCHIP for Medicare from Blue Cross is an example of this plan.
Medicare supplement – a supplemental insurance policy to help cover the difference between approved medical charges and benefits paid by Medicare. Blue Cross’s Plan 65 and 65 Select are examples.
PHO – Physician Hospital Association – An organization that includes hospitals and physicians contracting with one or more HMOs, insurance plans or directly with employers to provide health care services.
PHP – Prepaid Health Plan – An entity that provides a non-comprehensive set of services on either capitated risk or non-risk basis or the entity provides comprehensive services on a non-risk basis.
PMG – Participating Medical Group – a physician group, either primary care or multispecialty, which belongs to a health plan’s network and is thus covered under the plan.
POS – Point of Service – a health plan that allows the patient to choose the type of payment method (traditional, PPO or HMO) at the time service is received. It gives the option to either coordinate care through a primary care physician or to seek medical care from another provider, either in an HMO or from a provider outside the HMO. “Tier 1” is where the patient has a primary care physician coordinate all care. In “Tier 2” the patient may choose to receive care from within the plan’s network of physicians or hospitals, without going through the primary care doctor but this generally requires a deductible and paying a percentage of the bill. “Tier 3” is where the patient may choose any doctor outside the network, but pays an even higher percentage of the bill.
PPO – Preferred Provider Organization – An arrangement whereby a third-party payer contracts with a group of medical care providers to furnish services at lower-than-usual fees in return for prompt payment and a certain volume of patients. Generally there is no gatekeeper but many services require prior authorization by the insurer or the patient may be held accountable for a larger portion of the bill. HealthMate from Blue Cross is an example of a PPO.
PPS – Prospective Payment System – a new Medicare payment model for home health care that will begin Oct. 1 that’s built very similarly to the DRG reimbursement model and is based on 80 home health resource groupings. Each carries a different dollar amount based on clinical severity, functional capabilities and diagnosis.
Primary Care – First contact and continuing health care, including basis or initial diagnosis and treatment, health supervision, management of chronic conditions, preventative health services and appropriate referral.
Private insurance – traditional health care coverage purchased from an insurance company. Gives you free choice of physicians, hospitals and other health care facilities.
Premium – the amount paid for any insurance policy.
Reimbursement – Payment of actual charges incurred as a result of an accident or illness but not to exceed any maximums specified in the insurance plan contract.
Third-Party Payer – any organization, public or private, that pays or insures health or medical expenses on behalf of beneficiaries or recipients.
Single-payer – Government-paid health care using tax dollars.
