Health Care Reimbursement Issues

Health care reimbursement is a major issue in health care reform. Reimbursement is the standard method of payment to health care providers. The payer is often an insurance firm or government entity. How these payments are made is a central concern. Another important issue is the continued trade-off between an organization's efficiency and bottom-line profit versus the freedom of patients and providers.

The distinction between prospective and retrospective payments is an important one in health care administration. Administrators have tremendous power to decide what procedures are medically necessary for each patient and how much will be paid. Prospective forms of payment are really a type of managed care, a system where the payer lays out what is necessary for each patient and informs the provider as to which costs will be paid for and which will not. This form of prospective reimbursement has the advantage of being comprehensive. On the other hand, retrospective payments, or “fee-for-service” reimbursements, maximize the freedom of patients and providers to decide what procedures are best for each individual. The basic difference between prospective and retrospective reimbursement is the level of comprehensiveness versus the freedom of patients.

Efficiency issues are a major problem area for health care. Bureaucracy in the medical profession is widespread due to the complexity of reimbursement schemes, legal issues and the specialized nature of medical care. The concept of a “single payer” is envisioned as cutting down on the bureaucracy and paperwork by having just one central organization process billing, pay claims, and manage care. This organization is almost always a government entity of some sort. A single payer might streamline this process because having one organization handle all payments rather than hundreds of insurance companies and government agencies will cut down on paperwork and bureaucracy, leading to more efficient billing procedures and payment processing.

The medical profession is a highly regulated one, with considerable legal exposure in the course of medical practice, which drives up cost. Some argue that if the government were to reduce regulation of the health care profession and permit doctors to do their job unhindered, health care costs might fall while the freedom of patients to choose different plans would increase. In other words, increased competition among private health care providers would force them to offer low deductibles, low premiums and maintain the quality of care. Ideas such as lowering taxes on health care providers and insurers, breaking up large corporations, or offering incentives to provide affordable health insurance plans are intended to make make reimbursement as efficient as possible while controlling costs.