Healthcare Policy Exam 2 – Study Guide and Practice Questions Review
What programs dramatically increased the role of government in financing medical care? Prior
to this, how were NHE financed? - ANS ✔✔Medicare and Medicaid were enacted 1965. Before
Medicaid and Medicare until 1965, Total NHE spending in the Medical sector was predominantly
private ---80% of all expenditures were paid by individuals out of pocket or by private health
insurance on their behalf.
Medicare: who it covers, coverage of Parts A, B, C, D; how each part is financed - ANS ✔✔Part
A: hospital care and is financed by a separate (Medicare) payroll tax on the working
population=inpatient (enforced)
Part B: covers physicians' services and is financed by federal taxes (currently 75%) and by a
premium paid by the aged (25%)=outpatient
Part C: managed care option
Part D: prescription drug benefit -financed 75% by the federal government and 25% by the aged
Part B, C, and D: all voluntary programs
Medicaid: who it covers; how the program costs divided; expansion population in FPL; federal
match for expansion population - ANS ✔✔• Medicaid covers categorically or medically needy,
including the indigent aged and families with dependent children who receive cash assistance.
=CHIP (children something)
• How program costs divided: each state administers its own program and the federal
government pays on average more than half of the costs.
• Expansion population in FPL: the ACA enacted in 2010 and implemented in 2014 expanded
Medicaid eligibility from 100 to 138 % of the federal poverty level (FPL)
• Federal match for expansion population: The federal government reimburses states that
choose to expand Medicaid for up 90% of their costs for the newly eligible enrollees
Two largest components of medical expenditures - ANS ✔✔hospital care and physician and
clinical services
, Factors related to the decline in NHE in last ten years (Fuchs, 2013) - ANS ✔✔Great Recession,
slow economic recovery, high unemployment levels, a large number of uninsured, a decrease in
number of employers paying for employee health insurance, and the rapid spread of high
deductibles with health plans
Factors related to NHE rising in coming years - ANS ✔✔•NHE is likely to rise in the coming years
as the economy continues to recover more Baby boomers become eligible for Medicare new
technology and specialty drugs that improve quality of life, but are higher in cost are developed,
and as the ACA is fully implemented the expansion of Medicaid eligibility and subsidies for low
income enrollees on state health exchanges
•Effect: A 2014 Fundamental economic and demographic factors. Economy recovers, baby
boomers become eligible for Medicaid
Government response to rising costs: How did Medicare reimbursement for hospitals change in
the 1980s? Be able to distinguish between prospective (or fixed) vs retrospective (cost-plus)
payments - ANS ✔✔• The federal government agreed to pay HMOs a capitated (set price)
amount for enrolling Medicare patients, but less than 10% of the aged voluntarily participated.
Hospitals were no longer paid according to their cost. Fixed prices were established for each
diagnostic admission "DRG" (diagnosis related groups).
• Payment methods that give providers incentives to increase expenditures. In past, hospitals
paid on a cost-plus basis, rewarded for using more expensive methods.
o Prospective (or fixed): know ahead what you get paid for service, no matter how long the
patient stays---new way (Pay ahead of the service)
o Retrospective (cost-plus) payment: the opposite of prospective----old way (pay after services)
Consumer-driven healthcare - ANS ✔✔insures' method of shifting a larger share of medical
costs to consumers; in return for lower health insurance premiums, consumers pay higher
deductibles and copayments; consumers then presumably evaluate the costs and benefits of
spending their own funds on healthcare
What programs dramatically increased the role of government in financing medical care? Prior
to this, how were NHE financed? - ANS ✔✔Medicare and Medicaid were enacted 1965. Before
Medicaid and Medicare until 1965, Total NHE spending in the Medical sector was predominantly
private ---80% of all expenditures were paid by individuals out of pocket or by private health
insurance on their behalf.
Medicare: who it covers, coverage of Parts A, B, C, D; how each part is financed - ANS ✔✔Part
A: hospital care and is financed by a separate (Medicare) payroll tax on the working
population=inpatient (enforced)
Part B: covers physicians' services and is financed by federal taxes (currently 75%) and by a
premium paid by the aged (25%)=outpatient
Part C: managed care option
Part D: prescription drug benefit -financed 75% by the federal government and 25% by the aged
Part B, C, and D: all voluntary programs
Medicaid: who it covers; how the program costs divided; expansion population in FPL; federal
match for expansion population - ANS ✔✔• Medicaid covers categorically or medically needy,
including the indigent aged and families with dependent children who receive cash assistance.
=CHIP (children something)
• How program costs divided: each state administers its own program and the federal
government pays on average more than half of the costs.
• Expansion population in FPL: the ACA enacted in 2010 and implemented in 2014 expanded
Medicaid eligibility from 100 to 138 % of the federal poverty level (FPL)
• Federal match for expansion population: The federal government reimburses states that
choose to expand Medicaid for up 90% of their costs for the newly eligible enrollees
Two largest components of medical expenditures - ANS ✔✔hospital care and physician and
clinical services
, Factors related to the decline in NHE in last ten years (Fuchs, 2013) - ANS ✔✔Great Recession,
slow economic recovery, high unemployment levels, a large number of uninsured, a decrease in
number of employers paying for employee health insurance, and the rapid spread of high
deductibles with health plans
Factors related to NHE rising in coming years - ANS ✔✔•NHE is likely to rise in the coming years
as the economy continues to recover more Baby boomers become eligible for Medicare new
technology and specialty drugs that improve quality of life, but are higher in cost are developed,
and as the ACA is fully implemented the expansion of Medicaid eligibility and subsidies for low
income enrollees on state health exchanges
•Effect: A 2014 Fundamental economic and demographic factors. Economy recovers, baby
boomers become eligible for Medicaid
Government response to rising costs: How did Medicare reimbursement for hospitals change in
the 1980s? Be able to distinguish between prospective (or fixed) vs retrospective (cost-plus)
payments - ANS ✔✔• The federal government agreed to pay HMOs a capitated (set price)
amount for enrolling Medicare patients, but less than 10% of the aged voluntarily participated.
Hospitals were no longer paid according to their cost. Fixed prices were established for each
diagnostic admission "DRG" (diagnosis related groups).
• Payment methods that give providers incentives to increase expenditures. In past, hospitals
paid on a cost-plus basis, rewarded for using more expensive methods.
o Prospective (or fixed): know ahead what you get paid for service, no matter how long the
patient stays---new way (Pay ahead of the service)
o Retrospective (cost-plus) payment: the opposite of prospective----old way (pay after services)
Consumer-driven healthcare - ANS ✔✔insures' method of shifting a larger share of medical
costs to consumers; in return for lower health insurance premiums, consumers pay higher
deductibles and copayments; consumers then presumably evaluate the costs and benefits of
spending their own funds on healthcare
