Healthcare Financial Environment Introduction The United States (U.S) healthcare industry forms a very big part of the country s economy. It represents about 17% of the total personal expenditures per year. The provision of healthcare in the U.S is done by various entities including the state and local governments, non-profit organizations as well as for-profit organizations. The bigger ownership of these health facilities lies in the hands of private owners. Funding in the health care system is done via various schemes almost wholly based on different types of insurance covers offered by different providers of health care financial services. Medical care funding may be divided into three main sectors including the public sector (mainly by the government) and the private sector (by private insurance covers funded by employers and individuals) as well as the self payers that may be covered by no particular insurance scheme. All these organizations form an intertwined maze of connections between the healthcare service providers and the supportive financial organizations that fund this service provision through reimbursement schemes. The existence of various payment systems offered by third party payers such as government schemes and health insurance firms as well as self-payers makes a complex maze that raises issues of cost, inequality and quality service delivery. The different payment modes complicate the payment procedures especially; in cases of negotiated charge rates that differ under various schemes of cover. This has even led to some patients under schemes such as Medicaid and Medicare to be rejected by some service providers due non-conformity in reimbursement negotiations. 1 / 5
Additionally, most healthcare facilities find it difficult to handle their financial management because of the existence of numerous payment modes that all differ even with similar services. These challenges have led to various reform calls from various sectors within the industry, the public and the political wings. A large number of U.S citizens get their insurance health cover through schemes designated by their employers. Private employers may negotiate with private insurers to have their patients covered under their schemes. On the other hand, the public sector s employees may get cover under insurance schemes set up by the federal programs such as the Blue cross Blue shield federal employee program. Under these employee supported programs of health cover, the covered employees also contribute a percentage of the premium which differs depending on whether the cover is a single or family cover (Cameron & Cleverley, 2007). Employees also face additional charges that they have to pay in addition to the premiums paid. These additional payments within this financial structure come in form of co-payments and deductibles. These schemes form a sort of cost-sharing program. The cost spreading covers most of the expenses in medical care, but at times the insured may be required to pay part of the total cost as an up-front payment (deductibles) or a portion of the total cost (co-payment) (Gapenski, 2008). According to statistics 35% of medical expenses are covered by private insurance in the U.S. These insurance schemes are managed under policies aimed at negotiating a favorable fee at an exchange for quality medical care from selected networks of service providers. These service providers are reimbursed by the insurance firms upon the filing of service charges. The financial structure of most of these schemes is built on member contributions from employees and their employers. As stated earlier this contributions do not meet the entire costs and these may have to be supplemented by the co-payments and deductibles paid directly from enrollees of these schemes. Non-private government programs cover medical care provision to about 28% of the 2 / 5
total populace including the veterans, elderly, children, disabled and the poor (low income earners). The federal government also guarantees access to emergency medical care without considerations on whether the patient can be able to pay or not. This is provided under the EMTLA (Emergency Medical Treatment and Active Labor Act). However, there is no clearly laid out structure on how reimbursements can be made under the EMTLA; and as a result most payments have never been fully settled by the State. The U.S public spending on health is approximately 45%-56.1%, thus making the nation one of the biggest spenders on healthcare within the U.N nations (Cameron & Cleverley, 2007). There are various government funded programs meant to help in health care provision to various sections of the population, which are not necessarily government employees. These federal programs include Medicaid (a program administered via state authorities which covers low income earners under specific groups such as expectant women, the disabled and the children), Medicare (a program that covers the elderly citizens who are beyond 65 years of age), Veterans Administration (covers veterans), government run community clinics, county and state hospitals, National institute of health (it offers free treatments to patients participating in research programs and State Children Insurance Program (it covers children from low income families who are not covered under Medicaid) (Gapenski, 2008). Most of these programs are based on a policy framework that is driven towards the objective of creating equality in healthcare provision, by ensuring that even those that cannot access healthcare services are able to get medical care. Thus, most of the public healthcare programs are based on policies of fostering equal opportunity in healthcare for all citizens, by helping those that cannot afford healthcare in one way or another. The financial structures of these programs are either directly state funded or locally funded within the states, but the financial funds are obtained from taxes levied on the citizens. The last group of payment arrangement under self-payers mostly involves people unable to completely secure cover or sufficient cover, to the extent that they have to pay their medical 3 / 5
bills in the entirety or partially because of services that may not be under their cover. Most of the population in this category may go without medical attention totally because they are unable to obtain it through any of the available schemes. These presented modes of provision of financial funding presents a complex maze that gets even more complex in the processing of payments from various quarters that are supposed to fund medical care for different parts of the same population. The payments made for services are not standardized, because they are based on a multitude of negotiations from various third party payers (Ward & Finkler, 2006). The processing of reimbursements is also often covered with cases of fraud which lead to lack of payments if the patients cannot be traced to help process the reimbursement. The differences in amounts paid by different third party payers and self payers including those treated under charity care presents an accounting challenge. The consolidation of accounts becomes complex for accountants under healthcare management, thus presenting a unique challenge of managing healthcare in an efficient way(ward & Finkler, 2006). This multitude of slight variations and complexities makes healthcare financial management a little complex compared to other industries financial sectors (Ward & Finkler, 2006). Conclusively, the healthcare industry in America presents a complex challenge not only in healthcare financial sector, but also in the provision of the medical care itself. There is a visible need of standardization of payments as well as enhancement of affordability through the standardization. The lack of clear regulatory framework on health care finance has led to greater challenges in management which has in turn led to escalation of costs as third party payers and medical care provision networks work towards their own interests without regard for the patient. According to Fuchs and Emanuel (2005), the debate that should provide solutions at the moment should be geared towards standardization which should ensure accessibility, affordability and access to all citizens. References 4 / 5
Cameron, E. A. and Cleverley, O. W. (2007).Essentials of health care finance, sixth edition. Jones & Bartlett Learning. Fuchs, V., and Emanuel, E. (2005). Health care reform: Why? What? When? The Journal of Health Affairs, volume 24, issue number 6, p. 1399-1414. Gapenski, L. C. (2008). Healthcare Finance, fourth edition. Health Administration Press and Association of University Programs in Health Administration. Ward, M. D. and Finkler, A. S. (2006).Accounting fundamentals for health care management, Jones & Bartlett Learning. 5 / 5