Chapter 11
Health Care Payers
1. Define terms, phrases, abbreviations, and acronyms.
2. Identify and describe types of health insurance plans.
3. Discuss the differences between traditional fee-for-service and managed care plans.
4. Explain why health insurance plans and government programs implemented managed care plans.
5. Distinguish between private and government payers.
6. Describe the role of the Centers for Medicare and Medicaid Services (CMS) in government plans.
7. Discuss eligibility requirements for each government program and provide an overview of coverage for each government program.
8. Outline coordination of benefits (COB) guidelines for Medicare, Medicaid, and TRICARE.
9. Demonstrate an understanding of basic plan terms and specifications.
Advance Beneficiary Notice (ABN)
Children’s Health Insurance Program (CHIP)
Civilian Health and Medical Program of the Veterans Administration (CHAMPVA)
Coordination of benefits (COB)
Defense Enrollment Eligibility Reporting System (DEERS)
Exclusive Provider Organization (EPO)
Health Maintenance Organization (HMO)
Hospital-Issued Notice of Non-Coverage (HINN)
Local Coverage Determination (LCD)
Medicare Administrative Contractor (MAC)
Medicare Secondary Payer (MSP)
Military treatment facility (MTF)
National Coverage Determination (NCD)
Non-Availability Statement (NAS)
Preferred Provider Organization (PPO)
TRICARE Management Activity (TMA)
Aid to Families with Dependent Children
Ambulatory Payment Classifications
Civilian Health and Medical Program of the Uniformed Services
Civilian Health and Medical Program of the Veterans Administration
Children’s Health Insurance Program
Centers for Medicare and Medicaid Services
Current Procedural Terminology
Defense Enrollment Eligibility Reporting System
Exclusive Provider Organization
Early and Periodic Screening, Diagnostic, and Treatment
Federally Qualified Health Center
Health Care Financing Administration
Healthcare Common Procedure Coding System
Hospital-Issued Notice of Non-Coverage
Health Maintenance Organization
International Classification of Diseases, 9th Revision, Clinical Modification
International Classification of Diseases, 10th Revision, Clinical Modification
International Classification of Diseases, 10th Revision, Procedure Coding System
Medicare Administrative Contractor
Medicare Prescription Drug Improvement Modernization Act
Medicare Severity-Diagnosis Related Groups
National Coverage Determination
Participating provider agreement
Preferred Provider Organization
Resource-Based Relative Value Scale
State Children’s Health Insurance Program
Usual, customary, and reasonable
Today the health insurance industry consists of a large number of insurance companies offering a wide spectrum of coverage through many different plans and government-sponsored programs (Figure 11-1). Hospitals provide services to patients for treatment of conditions that are covered under various health insurance plans. The process of submitting claims for hospital services is complex because of variations in plan types, coverage, reimbursement, and billing requirements. It is important for hospital personnel involved in billing and coding services to have an understanding of these variations to ensure compliance with plan requirements and to obtain accurate reimbursement. A discussion of all payer plan variations is beyond the scope of this text. In fact, the insurance industry is so diverse that much of the required knowledge can only be gained through experience with the various payers. This chapter provides an overview of key elements of various types of health care coverage and payers.

Types of Health Insurance Plans
Traditional Fee-for-Service Plans
Characteristics of Fee-for-Service Plans
• Health care services may be obtained from providers of the patient’s choice.
• Authorizations or referrals are not required.
• The hospital charges a fee for each service.
• Reimbursement is based on a percentage of the total charges.
• The patient is responsible for a deductible and coinsurance.
Managed Care Plans
Characteristics of Managed Care Plans
• A wide range of preventive, diagnostic, and therapeutic services are covered.
• Patient care services must be coordinated through a primary care physician (PCP).
• Health care services are provided within a network of providers as defined by the plan.
• A referral from the PCP is required for the patient to seek care from other providers.
• Reimbursement is determined on a capitation basis, which is a predetermined, fixed payment, per member, per month.
• The plan requires the patient to pay a copayment for specified services. Payment of a deductible may also be required by the plan.
• The plan contains provisions regarding cost-containment measures.
Types of Managed Care Plans
TABLE 11-1
Type of Plan | Services | Monitored Care “Gatekeeper” | Care Providers | Cost-containment | Reimbursement | Patient Responsibility | |
Preventive, Diagnostic, and Therapeutic Services | PCP | Participating Network Providers | Non-PAR Out-of-Network Providers | Referrals, Precertification, Second Opinion | Periodic Fixed Payment Predetermined | Copayment/Coinsurance/Deductible | |
Health Maintenance Organization (HMO) | Yes | Yes | Yes | No benefits | Yes | Yes Varies by plan | |
Preferred Provider Organization (PPO) | Preventive service coverage varies | No | Yes | Yes Higher out-of-Pocket Cost | Yes Varies by plan | ||
Point of Service (POS) | Yes Reduced benefits | Yes | Yes | Yes Higher out-of-Pocket Cost | Yes Varies by plan | Yes Varies by plan | |
Exclusive Provider Organization (EPO) | Yes | Yes | Yes | No benefits | Yes | Yes Varies by plan |
Government Payers

Medicare
• Individuals 65 years of age or older
• Individuals who are eligible for Social Security disability

Eligibility
• Worked for at least 10 years as a Medicare-covered employee (contributions were made for Social Security)
• Are citizens or permanent residents of the United States
• Are eligible for Social Security disability benefits or
• Have end-stage renal disease (ESRD)(permanent kidney failure requiring dialysis or transplant)
Coverage

Medicare Part A
1. Inpatient hospitalization, which includes room and board (semi private), medications, supplies, nursing care, and other hospital services.
2. Skilled nursing facility care provided by a Medicare-approved nursing facility. Nursing facility services are covered when the patient is admitted to a nursing facility from a hospital after a minimum stay of 3 days in the facility.
3. Home health care provided on a part-time or intermittent skilled care basis, including home health aide services, durable medical equipment, supplies, and other services.
4. Hospice care services provided to a patient who is terminally ill for the purpose of relieving pain and symptoms.
5. Blood required during a patient stay, after the first 3 pints.
TABLE 11-2
Services | Benefit | Medicare Pays | Patient Pays |
Inpatient Hospitalization Semiprivate room and board, general nursing, and miscellaneous hospital services and supplies (Medicare payments are based on benefit periods) Includes: hospitalization in a hospital, psychiatric, rehabilitation, or long-term care facility | First 60 days | All but $1,184 | $1,184 deductible |
61st to 90th day | All but $296 a day | $296 a day | |
60 reserve days benefit† | All but $592 each day after 90 | $592 a day | |
Beyond 150 days | Nothing | All costs† | |
Skilled Nursing Facility Care Patient must have been in a hospital for at least 3 days and enter a Medicare-approved facility generally within 30 days after hospital discharge‡ (Medicare payments based on benefit periods) | First 20 days | 100% of approved amount | Nothing |
21st to 100th day | All but $148.00 a day | Up to $148.00 a day | |
Beyond 100 days | Nothing | All costs | |
Home Health Care Part-time or intermittent skilled care, home health aide services, durable medical equipment and supplies, and other services | Unlimited as long as Medicare conditions are met and services are declared “medically necessary” | 100% of approved amount; 80% of approved amount for durable medical equipment | Nothing for services; 20% of approved amount for durable medical equipment |
Hospice Care Pain relief, symptom management, and support services for the terminally ill | If patient elects the hospice option and as long as doctor certifies need | All but limited costs for outpatient drugs and inpatient respite care | Limited cost sharing for outpatient drugs and inpatient respite care |
Blood | Unlimited if medically necessary, after the first 3 pints | All but first 3 pints per calendar year§ | For first 3 pints |