Medicare, Medicaid and the Delivery System Q1

Medicare,Medicaid and the Delivery System


Medicareis a major health insurance schemes in the United States, and itcovers individuals who are 65 years or older and those who are underany form of social security support. Individuals covered by theprogram can seek services from different institutions. The AMA hasset an internal mechanism of reimbursing the physicians depending onthe value of the services they offer. The current reimbursementprogram is based on the fee schedule for nurse practitioners,optometrists, physicians and their assistants, chiropractors amongother forms of specialized treatment (Mulvany, 2016).

Theintroduction of the fee schedule solved the problem of variedgeographical charges that were triggered by the difference inresource endowment. The Physician Payment Review Commissionrecommended the program to the Congress, and the Medicare AdvisoryCommission was tasked with overseeing the implementation of theprocess (Mulvany, 2016). The reimbursement is determined by therelative value of the service rendered, geographic charges priceindex and the dollar conversion rate. The payment is also advised bythe practice related expense that accounts for 54.2% of the totalexpenses, skills, rent and wages that amount to 42.3% and incidenceof malpractice that is valued at 3.2% of the cost of services(Mulvany, 2016). The level of skills of the practitioner is also usedas a baseline to determine the amount to be reimbursed. Under theGCPI, the law stipulates that practitioners who provide services inrural settings are entitled to an additional 10% reimbursement abovewhat they would otherwise receive under the fee schedule (Mulvany,2016).

Inaddition, the American Medical Association has introduced codes toall the services offered by different practitioners. The bodyallocates the appropriate relative value unit to the codes, and thisdetermines what the physicians receive. Initially, the governmentused a retrospective method of reimbursing hospitals. That is, thecost was determined on an individual basis. Through the Reaganadministration, the federal government introduced a ProspectivePayment System that came up with a list of diagnosis and theappropriate treatment cost. The PPS sets a flat-fee cost fordifferent conditions (Oberlander &amp Laugesen, 2015). Using theapproach, Medicare pays for all Diagnostic Related Groups regardlessof the amount consumed by individual patients.


Medicaidis a jointly executed health program by the states and the federalgovernment to provide medical assistance to certain groups ofcitizens. The program complements the services rendered through thefederal Medicare program by rendering nursing home care and otherpersonalized services. For eligibility purposes, each state sets itsguidelines to determine the financial resources of the applicants.For states to qualify for Medicaid funds, they are required to showevidence of providing care to individuals who receive federal socialassistance (Brecher &amp Shanna, 2014).

Thereare various groups of citizens who qualify for Medicaid services.They include children under the age of six years who hail fromfamilies that are below 133% of the FPL. The government set the FPLat $22,050 in 2010 (Brecher &amp Shanna, 2014). Pregnant women whoalso come from such families are also allowed to benefit from theprogram. However, the services that they receive are limited toprenatal, delivery and postpartum care. In addition, infants born tothe women who are eligible for the program are covered during thefirst year of their life. The program also covers individuals whoreceive supplementary security income including the blind, aged andthose with other forms of disabilities. The states also consider therecipients of foster care as specified under Title IV of the SocialSecurity Act. Finally, Medicaid benefits are also enjoyed by childrenbelow the age of 19 years who hail from families considered to bebelow the FNL and other special protected groups who lose theirentitlement to the cash transfer program (Brecher &amp Shanna,2014).

Forreimbursement purposes, the states operate a vendor payment programin which they remit the charges directly on a fee-for-servicedelivery. They may also cater for the services through the HealthMaintenance Organizations (Brecher &amp Shanna, 2014). However, thechoice of the methods is left to the discretion of the states. Thefederal government requires the states to ensure that the paymentsare fair enough to enlist enough health care providers and increasethe coverage. The states are also mandated to make additionalpayments for individuals who do not have any form of health insurancethrough the Disproportionate Share Hospital Program.


Theintroduction of Accountable Care Organizations is meant to improvethe quality of services redder by physicians. It involves a changefrom the fee-for-service to a value-based compensation (Macfarlane,M. A. 2014). The new reimbursement model will include pay forperformance, shared savings, bundled payments, capitation and thehybrid model.

Thepay for performance seeks to compensate practitioners on the basis ofclinical and cost-saving outcomes rather than on the principle of theservices rendered. This will be calculated in the form of reducedunnecessary admissions, unneeded diagnostic tests among othernon-required practices. The physicians who keep track of the costsaving will benefit more from the program (Macfarlane, 2014). Theshared savings give practitioners an opportunity for financial gain.They may come together to form an ACO and contract a payer to offerservices to a population and meet the quality and cost standards thatthey set. If the payer provides services at a lower thresholddetermined by the ACO, the physicians benefit from the profits. However, they are expected to absorb any overhead costs.

Underthe bundled payment, the physicians are set to negotiate for fixedpayments for different cases requiring their attention. In addition,the physicians are required to assess various conditions to determineother practitioners who may be involved, calculate the return on theinvestment and communicate with their payers. This would ensure thatthey keep their costs within the stipulated budget (Macfarlane,2014). ACOs have also attracted the capitation method ofreimbursement. It involves pre-payments to doctors for pre-definedservices. However, this is expected to vary from one region toanother due to the local cost differences. Finally, some careproviders have opted for the hybrid method of reimbursement. Theyfeel that a multi-dimensional plan is more favorable as opposed to arigid method. The hybrid approach includes the fee-for-service,capitation, and pay-per-performance (Macfarlane, 2014).


Theproposed ACOs, if implemented to the detail, can remodel theprovision of healthcare in the United States. I believe the successof the program lies in three distinct factors. First, the public mustbe made aware of the existing ACOs to reduce the cases of patientsseeking services from non-complaint institutions. The rationale forthis is that most of the patients have been under the Medicareprogram for decades and the shift is not devoid of hurdles. This willinstigate more physicians for form ACOs and significantly reduce thecost of health care (Budryk, 2015). Secondly, the financial modeladopted for ACOs should give the physicians a greater share of theirinitial savings. The bigger incentives are likely to induce theirparticipation in the program. This will also trigger growth andattract high performing institutions to join the program (Budryk,2015). Finally, I believe that restricting supplemental healthinsurance coverage will compel citizens to seek services from ACOs.The rationale for this is that the numerous schemes only add to thehealth burden. Since the united states us the highest spendingcountry in terms of healthcare provision, there is a need tostreamline the services to value-based services. However, I believethis may require a congressional act.


Brecher,C. &amp Shanna, R. (2014). Medicaid`s Next Metamorphosis. PublicAdministration Review,73(1), s-60-s68.

Budryk,Z. (2015). 5changes to help medicare ACOs thrive.Newton: Questex Media Group LLC.

Macfarlane,M. A. 2014). Sustainable Competitive Advantage for Accountable CareOrganizations. Journalof Healthcare Management,59(4), 263-71.

Mulvany,C. (2016). MACRA the medicare physician payment system continues toevolve. HealthcareFinancial Management,70(2), 32-35.

Oberlander,J., &amp Laugesen, M. J. (2015). Leap of faith — medicare`s newphysician payment system. TheNew England Journal of Medicine,373(13), 1185-1187.