Understanding the Health-Care Debate

TIME.com :  By Kate Pickert Monday, Aug. 17, 2009

Term What it is Why it matters
Actuarially Sound An insurance plan that collects enough money in premiums to at least cover claims paid out. Insurers now charge high premiums for small risk pools, like small businesses, to make sure they can cover whatever claims they might have to pay. This means, for example, if a business has 10 … employees  and one gets cancer, costing the insurer a lot, premiums for the whole group will be driven up. Health-reform proposals on the table could allow insurers to stay actuarially sound — without setting premium rates on the basis of pre-existing conditions — by forcing every American to get health insurance and allowing small groups and individuals to pool together through a health-insurance exchange (see definition).
Bending the Curve Slowing the growth in health-care spending, which at its current rate would exceed 20% of the U.S. gross domestic product by 2018. Both sides of the political aisle agree that health-care spending is growing at an unsustainable rate. A central goal of reform proposals is to “bend the curve” of spending — i.e., for citizens, insurance companies and the government to spend less money overall on medical care. One example of a reform proposal that could bend the curve is providing and funding more preventive care, which is cheaper than treating chronic diseases that develop when people don’t get regular checkups.
Bundling Paying providers (i.e., doctors and hospitals) fixed bulk payments for taking care of patients, rather than charging patients or insurance companies separately for every individual service and procedure. Health economists say bundling could lower overall health-care spending by encouraging doctors to keep patients healthy instead of encouraging them to perform unnecessary procedures. Some reform proposals would promote payment-bundling.
“Cadillac” Health Plans Also known as “gold-plated insurance,” these plans are very expensive, very generous and require little or no out-of-pocket expenses for those who have them. Public employers and union employees in the manufacturing sector (like many of those who worked for the Detroit automakers) commonly have Cadillac plans. Health-care economists say these plans encourage unnecessary health-care spending. Since people with Cadillac plans don’t have any interest in finding cost-effective health care — because they don’t pay anything for it — they don’t exert pressure on providers to lower costs or save money. Some lawmakers want to tax these plans to discourage them from being offered to employees.
Capitation A flat fee a health insurer pays to a provider to care for a patient’s medical needs — as opposed to individual reimbursement for each service provided. Capitation became popular with HMOs during the 1990s, but interest in it waned when providers claimed they were not being adequately compensated for the care they delivered. Capitation gives providers an incentive to offer cost-effective care, while still keeping patients healthy. But it can leave providers vulnerable to substantial losses if enough patients in a capitated group need expensive care.
Catastrophic Health Insurance Coverage with a very high deductible that is intended to protect against unforeseen illness or injury. While this insurance can protect against medical bankruptcy, it does not typically cover routine, preventive medical care. The availability of this type of insurance has allowed many Americans to get coverage at an affordable price, but these patients are still vulnerable to high out-of-pocket costs. Plus, if routine, preventive care is not covered, patients are less likely to get it elsewhere.
Chronic Diseases Conditions such as cancer, heart disease and diabetes, which are the leading causes of death in the U.S. Chronic diseases are extremely expensive to treat and have contributed to much of the recent increase in overall health-care spending. Reform proposals would attempt to address this issue by providing more of a focus on preventive care that would keep chronic diseases from developing.
Co-Insurance Insurance that covers a preset percentage of a patient’s medical care. For example, a health-care plan that covers 80% of the charge for hospitalization, leaving the patient responsible for the remaining 20%. This coverage is often cheaper, but costs can quickly spiral out of control if a patient needs expensive surgery.
Community Rating Ignoring health status when setting health-insurance-premium prices. Reform proposals would make this federal law, eliminating the ability of insurers to charge the sick or previously sick exorbitantly high rates that make insurance unaffordable for many Americans.
Comparative-Effectiveness Research Research into which medical procedures and treatments are most effective. The 2009 Recovery Act included funding for comparative-effectiveness research, and President Obama supports even more funding for it, saying it will lead to better care. Such research would also save money, if more-expensive procedures and treatments were found to be no more effective than cheaper ones. Opponents say such research could take medical decision-making out of the hands of doctors and give the government the power to decide what treatments should be covered by insurance.
Congressional Budget Office (CBO) and Scoring A nonpartisan federal agency staffed by economists and policy experts that evaluates, or “scores,” the effect of congressional legislation on the federal budget. CBO has been scoring various House and Senate health-reform proposals to give lawmakers information about how much their legislation would cost over a 10-year period.
Co-Pay The preset fixed amount a patient must pay at the time a medical service is rendered. Some of the most expensive health-insurance plans have very low co-pays for a variety of services, including doctor visits and even hospitalizations. Some reformers say this discourages people from making cost-effective medical choices.
Deductible The amount a patient must pay out of pocket before an insurer will begin paying claims. Health-insurance plans with higher deductibles cost less than plans with lower deductibles. Some expenses, like doctor visits, are often covered by insurance before a deductible is met. Many Americans choose to buy health-insurance plans with very high deductibles because their premiums may be low, but they risk incurring thousands of dollars in unreimbursed expenses. Some reformers advocate a high-deductible plan, saying it forces enrollees to make better choices about what they want to spend money on in terms of medical expenditures.
Defensive Medicine Doctors and hospitals performing unnecessary tests and procedures on patients to ward of potential malpractice lawsuits. This practice drives up overall health-care spending. Meanwhile, malpractice insurance can cost doctors hundreds of thousands of dollars per year. Many doctors acknowledge that they practice defensive medicine but say they have no choice because they are constantly worried about being sued. Tort reform — like capping malpractice awards — could help. Obama says he knows defensive medicine is a problem, but he does not support capping malpractice awards.
“Doughnut Hole” A gap in prescription-drug coverage for some Medicare recipients. In 2009 these Medicare beneficiaries have no drug coverage once their medication costs exceed $2,700 until they have spent $4,350 out of their own pocket. Seniors who reach the doughnut hole often cut back on medications or stop taking them altogether, endangering their health. Obama recently made a deal with pharmaceutical companies that would cut the cost of brand-name drugs 50% for seniors in the doughnut hole.
Employer Mandate A requirement that employers provide health insurance for employees, or pay a financial penalty. Reform proposals would institute an employer mandate, exempting some small businesses.
End-of-Life Care Medical services for people who are in the last stages of life. Some 30% of Medicare spending is on people in their final year of life. One controversial reform proposal would reimburse doctors who counsel patients on end-of-life care, helping advise them on how to establish guidelines for how they want to be cared for when they are dying.
Federal Employee Health Benefits Program (FEHBP) A government program that allows some 8 million federal employees, including members of Congress, to purchase private health insurance. The government provides a set amount of money to employees, who can select from a variety of health plans. The FEHBP offers federal workers lots of choice and provides an effective pooling mechanism to allow employees to buy health insurance in large groups so that coverage is more affordable. Reform proposals would extend this model to small businesses, individuals and families now purchasing coverage on the open market.
Fee-for-Service Paying or billing for every individual medical procedure, test or device. This is the most common way payments are made in the U.S. health system. This payment structure is a major reason that health-care spending is growing at an unsustainable rate, prompting lawmakers to want to reform the system.
Generic Drugs Prescription drugs with the same ingredients as name-brand drugs, but which are sold at a fraction of the cost. Once a pharmaceutical company develops a drug, the company’s patent rights prevent that drug from being sold in generic form for a set period of time. In order to reduce prescription costs for patients (especially seniors), reform advocates want to speed up the pace at which generic drugs reach the market.
Guaranteed Issue A rule that health insurers sell coverage to anyone who applies for it. Reform proposals would make this federal law, reversing the current insurance practice of turning away applicants who are likely to file expensive claims.
Health-Insurance Cooperative Pools of people band together to collect premiums and pay health-care expenses without the help of the government or private insurance industry. These co-ops are nonprofit and owned and operated by members. The Senate Finance Committee has proposed the creation of 50 state-based co-ops as an alternative to a nationwide government-run health-insurance plan. Many policy experts think co-ops would not be able to pressure the private insurance industry to lower rates as effectively as a federally-run insurance plan, but some moderate Democrats and Republicans in the Senate believe creating these, instead of a federal plan, is the only way to pass bipartisan health-care-reform legislation.
Health-Insurance Exchange A government-administered marketplace or portal (via a website) where private or public insurance policies are sold. Reform proposals would create national or state-based exchanges open to individuals and small businesses. Policies offered there would be vetted by the government to make sure they meet minimum standards and would be less expensive than those now sold on the open market.
Health-Maintenance Organization (HMO) An insurer that collects set fees from enrollees for comprehensive medical care, determining which procedures are necessary and limiting services to within a pre-determined network of health-care providers. Blue Cross and Blue Shield are HMOs. An HMO generally requires that enrollees choose a primary-care doctor when signing up for coverage, which helps promote ongoing routine, preventive care. Premiums are lower than traditional health insurance, but patients are severely limited in what procedures are covered and which providers they can see.
Health-Savings Account (HSA) A tax-deductible personal savings account, usually offered by employers along with high-deductible health-insurance plans, that can be used to pay for medical expenses. If patients are paying for medical services with their own money out of an HSA, they are more likely to make cost-conscience choices in how and where they receive medical care. Many Republicans, including John McCain when he was a presidential candidate, say that expanding the use of HSAs could help solve much of the health-care spending crisis.
Individual Mandate A requirement that every American have health insurance, which would be enforced through financial penalties. An individual mandate is a central tenet of reform proposals. The insurance industry, which thus far supports reform efforts, is in favor of this provision, as it would dramatically increase the number of Americans buying health insurance.
Medicaid A government-funded health-insurance plan that covers the poorest Americans, so long as they meet one other condition, like being a parent or being disabled. Reform proposals would expand Medicaid eligibility to more people, including able-bodied adults with no dependent children.
Medicare A government-funded health-insurance plan for Americans over the age of 65. Reform proposals would cut funding for Medicare dramatically, theoretically to make the system more efficient and cost-effective. The system is already under financial strain, as baby boomers are beginning to reach the age to qualify.
MedPac The Medicare Payment Advisory Commission, an independent congressional agency that makes recommendations to Congress about Medicare, including reimbursement levels and what procedures and services should be covered. Some reform proposals would give MedPac the ability to set Medicare reimbursement rates, instead of just advising Congress on what they should be. Advocates say it would take politics out of Medicare decisions; critics say it would give too much power to unelected officials who are not accountable to voters.
Patient-Centered Medical Home A concept in which a patient’s medical care is coordinated by and funneled through a primary-care provider, so that all providers caring for that patient work together to avoid redundancy and miscommunication. Reform proposals would provide funding for this approach, which is expected to save money and improve the health of patients.
Pooling Grouping large numbers of people together to spread out their health-insurance risks. The larger and more diverse the pool of people, the cheaper their premiums can be. Reform proposals would enable individuals and small groups — like small businesses — to join large pools through a publicly run health-insurance exchange (see definition). A public health-insurance plan would also provide a mechanism for pooling Americans who are now forced to buy insurance on their own or in small groups.
Portability The ability to take your health-insurance policy with you if you change or lose your job or move. Americans with employer-sponsored health insurance lose coverage if they leave their job. Although federal law guarantees that people moving from job to job can sign up for new policies, costs can vary dramatically. A public health-insurance plan (as put forward in reform proposals) would allow Americans to keep such insurance regardless of where they work.
Pre-Existing Condition A health-insurance plan that reimburses medical expenses at different rates, depending on whether a patient chooses to get care inside or outside a pre-determined group of providers. A PPO offers more choice than a cheaper HMO, but it also encourages patients to stay within a specific network.
Preferred-Provider Organization (PPO) A concept in which a patient’s medical care is coordinated by and funneled through a primary-care provider, so that all providers caring for that patient work together to avoid redundancy and miscommunication. Reform proposals would provide funding for this approach, which is expected to save money and improve the health of patients.
Preventive Care Routine medical care and screenings that can help patients and providers catch medical problems before they turn into dangerous, chronic conditions. Mammograms, regular checkups and even flu shots are all classified as preventive care. Catching medical problems in the early stages can yield huge savings. Reform proposals would promote preventive care by requiring insurers to cover (with no co-pay) preventive services.
Primary-Care Provider (PCP) General practitioners who see patients for common and routine medical care and who typically are a patient’s main medical contact point for an extended period of time. PCPs can be family doctors, pediatricians, internists, nurse practitioners, physician’s assistants and even gynecologists. The U.S. is experiencing a shortage of PCPs, with some estimates stating that the country needs 30% more to fill current demand. If reform passes and the estimated 46 million Americans without health insurance get it, that need will increase dramatically. PCPs are the practitioners who coordinate patients’ medical needs and stress preventive medicine, two central tenets of reform proposals. Because of this, reform proposals would use financial incentives like student-loan forgiveness to encourage medical students to choose careers in primary care. (Primary-care physicians generally earn less than specialists like surgeons.)
Public Option A government-run health-insurance plan that could offer coverage at a cost below that of private insurance plans because of lower administrative costs and possibly lower reimbursements to doctors and hospitals. This is one of the most controversial parts of health-care reform. Obama says a public plan would “keep the insurance companies honest” by giving them competition. But the private insurers are vehemently opposed to a public plan, as are Republicans, who say it would be a government incursion into the free market.
Rescission Insurance companies’ practice of dropping patients after they file expensive claims, on the grounds that applicants misrepresented their health history when they signed up for coverage. Rescission has been the focus of congressional hearings and would be banned by the reform proposals on the table, especially because pre-existing conditions would not be a factoring in selling insurance or setting rates.
Single Payer A system in which a government insures all its citizens, paid for by tax dollars. It is used by Britain and Canada. It doesn’t, for the most part. No reform proposals in serious consideration call for a single-payer system. But some critics charge that reform proposals are a Trojan horse for single payer — that the Democrats and President Obama see the reform effort as a step in the direction of single payer.
Subsidies In the context of health-care reform, these are financial credits from the government that are distributed to Americans — calculated based on income — that Americans could use to purchase health insurance. Reform proposals would distribute subsidies to Americans who don’t qualify for Medicaid but who earn up to 300% or 400% of the federal poverty line. Subsidies could be used to purchase private insurance (or new public insurance, if it exists).
The Underinsured People with, for example, catastrophic health insurance (see definition) but who still face the threat of high medical bills and who are just as likely as the uninsured to forgo services like preventive care. The underinsured also include people who have relatively low caps for insurance, meaning their insurers will pay only a preset annual amount (any expenses beyond that will not be reimbursed). Research suggests that as many as 25 million Americans are underinsured. The underinsured aren’t likely to stave off development of chronic diseases, since they often don’t receive routine medical care. In the end, this means their health-care costs are higher than those who are fully insured. They also face the threat of medical bankruptcy, despite being technically insured.
The Uninsured An estimated 46 million Americans. Several groups make up a large portion of the uninsured: young adults who can’t afford health insurance and don’t feel they need it; people without employer-sponsored health insurance who have pre-existing conditions that make buying an independent policy cost-prohibitive; families and individuals who aren’t poor enough to qualify for Medicaid but who are too poor to afford health insurance; employees of small businesses who choose not to or can’t afford to offer insurance to employees; and illegal immigrants. Research has shown that the uninsured do not get regular routine medical care, which means they have higher rates of chronic and preventable diseases, driving up the nationwide cost of health care. The uninsured often seek care only when they are very sick and then go to emergency rooms, which has caused massive overcrowding in ERs across the country. Hospitals must care for the uninsured regardless of their ability to pay for services, and these costs often get absorbed by hospitals and passed on to paying patients and insurance companies, driving up health costs for everyone. Provisions in reforms would get many of the uninsured covered, though not all. When young, healthy people elect not to get health insurance, it skews the insurance risk pools, driving up average premium prices.
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