Pharmaceutical Industry - Research Paper Example

Medicare and the Relative Risks to Both Insurer and Hospital The United s has a complex healthcare system that focuses on reimbursement for services already provided and expenses that have already occurred (Casto & Layman, 2006). Unlike standard business models, patients frequently leave the hospital already treated, but without paying for the service (Bodenheimer, Wagner, & Grumbach, 2002). This means that the hospital needs to have a way of getting the money for the services and expenses that they have incurred.

This is generally done through reimbursement systems that rely on patients having health insurance (Casto & Layman, 2006). Insurance companies work by charging a premium for people to use their service, this premium is often paid in part by employers. To reduce their personal risk, insurance companies spread their services over a large group of people. As a consequence, the insurer receives premiums for taking on the risk for the people that it insures, and calculates the number of people in the group such that any losses are covered by the premiums paid by the rest of the group (Casto & Layman, 2006).

Medicare works in a similar way, and is so effective as a business model, that private insurance firms base their models off that of Medicare (Bodenheimer et al., 2002).Medicare is a reimbursement system used in hospitals in the United States. It is large, with spending totaling over $11.7 billion in 1999 (Cotterill & Gage, 2002). Medicare is a form of insurance, using contributions from both employers and employees to make part of the premium for individual coverage. In addition, some individuals who do not have health insurance benefits through their jobs pay a direct Medicare premium which is then matched by the government (Casto & Layman, 2006).

Payments from Medicare to hospitals are dependent on the number of patients that are being admitted to the hospital (Bodenheimer et al., 2002). Medicare works to provide reimbursement for costs such as per diem fees, but doesn’t take care of start up costs, some physician costs, and there are no bonuses in Medicare subsidies for superior care. From a health care perspective this means that any increase in care comes at the hospitals own cost, and is not reimbursed, and that the best financial results come from decisions that result in lower health care (Bodenheimer et al., 2002). An important part of determining how to best treat patients is to look at the costs versus level of care.

One example of this kind of decision is the instigation of a program that reduces hospital admissions in order to allow staff to provide better care to patients. However a hospital that did this found that it significantly dropped the reimbursement received from Medicare, and as a consequence the hospital found it necessary to stop the program in order to get maximum reimbursement from Medicare (Bodenheimer et al., 2002). From a health care perspective, this means that the reimbursement system results in the hospital losing money when it tries to increase care to patients.

Medicare is a healthcare insurer that is used in many hospitals. It provides reimbursement on a fixed basis per treated individual, for treatments that have already been provided. Medicare acts as an insurer for a large pool of clients to ensure that any losses through having to pay for medical care are balanced by the premiums charged to the remaining clients. A consequence of the way Medicare allocates its reimbursement is that it promotes a lower standard of patient care, with allocation being the same despite the length of time stayed, and no differences in allocation based on quality.

ReferencesBodenheimer, T., Wagner, E. H., & Grumbach, K. (2002). Improving primary care for patients with chronic illness. JAMA: the journal of the American Medical Association, 288(15), 1909.Casto, A. B., & Layman, E. (2006). Healthcare Reimbursement Methodologies. Principles of healthcare reimbursement (pp. 1-15). American Health Information Management Association.Cotterill, P. G., & Gage, B. J. (2002). Overview: Medicare post-acute care since the Balanced Budget Act of 1997. Health care financing review, 24(2), 1–6.