Patient Compensation Funds

Several states have set limits per year and per claim on the amount of liability of health care provider can incur. Compensation in excess of the limit is provided by a state-operated patient compensation fund. Funding for the PCF typically comes from a surcharge on malpractice insurance premiums, as in Indiana, or from general state revenues, such as in Kansas. In some states, the Patient Compensation Funds liability is limited, but in others, it is open-ended. This is another mechanism for indirectly cross-subsidizing physicians with relatively high claims costs. Several Patient Compensation Funds have had difficulty maintaining solvency, and states appear to be moving away from the Patient Compensation Funds approach.

Joint Underwriting Association

As a reaction to the malpractice insurance crisis of the mid-1970s, many states authorized joint underwriting associations as a standby on a mandatory basis. In 1987, 13 medical malpractice JUA were offering coverage to health care providers. The 10 active JUA’s in existence for more than a couple of years have market shares ranging from 3 to 80 percent. Where operational, Joint Underwriting Association require participation by at least all insurers that write medical malpractice insurance and frequently by all property-liability insurers that write insurance in the state. The purpose of these organizations is to be the insurer of last resort—that is, to cover providers who cannot obtain coverage from other sources. One carrier operates the pool on behalf of the state, collecting premiums and paying claims. Joint Underwriting Association operate as mandatory assigned risk pools similar to risk pools established for automobile insurance. As documented, the Joint Underwriting Association insure a substantial proportion of physicians in a few states. As of 1988, 12 Joint Underwriting Association offered coverage to health care providers.

If joint underwriting associations premium income is insufficient to cover losses and expenses, each member company is assessed pro rata to make up the shortfall. To this extent, there is an enforced cross-subsidy that, in competitive insurance markets, must be recovered from the insurer members’ customers in some way. The cross-subsidy introduces another “residual claimant,” namely, the beneficiary of the cross-subsidy. This claimant is paid before the owners of member insurers. Suppliers of equity to a stock company will not want to supply capital for less than the competitive, medicare risk adjustment rate of return. Thus, the cross-subsidy must be reflected in higher premiums to regular customers, who in a state with a joint underwriting associations have no regularly insured source of coverage that does not bear the “JUA tax.” In the case of insurance ownership like mutuals or reciprocals, the policyholder and equity holder roles are combined. Then it is the combined policyholder-equity holder that bears the tax. Since the tax is typically spread over many types of insurance, most of the burden is borne by the public at large.

The stated purpose of Joint Underwriting Association is to assure availability of malpractice insurance coverage to health care providers at “affordable levels”. Thus, by design, the Joint Underwriting Association often sets premiums below what the market will bear. Premiums are monitored by a combination of “pressure from physicians” and premium regulation. In states where Joint Underwriting Association have become major malpractice insurers, it appears that physicians have taken advantage of an enforced alberta blue cross premium subsidy. Most Joint Underwriting Association are not allowed to withdraw from the market even in response to rate denials by the state insurance department. As of 1986, a number of Joint Underwriting Association had serious deficiencies in their reserves.

Public access to medical care at a reasonable price is the second major public interest. There is good evidence that higher malpractice premiums cause higher prices for physicians’ services (Sloan 1982). Indeed, physicians seem not merely to pass through the full cost of insurance increases to patients but also to raise prices even further. A given rise in premiums seems to raise fees by about twice that amount. However, since premiums remain a very small component of physician expenses on average, even with a double effect of fees, the contribution of premium increases to physician fee inflation has been minor. The most plausible explanation for the double pass-through is that physicians provide more care per service—better record keeping, more time talking with patients, and the like—which raises their costs of service. Whether presumably higher levels of service are worth their price is not obvious in the heavily subsidized medical services market; the issue has not been analyzed in systematic fashion.

Frequent statements by physicians suggest that the extra care is not worthwhile. Extra tests and procedures are said to be done more for potential legal defense than for value in health care. Very high estimates exist of this cost—up to $15 billion annually in 1985 dollars. This defensive padding of services is widely believed to occur, but its extent is very hard to document, for factors other than malpractice fears also promote service-intensive care—including patient demand and physician profit seeking.

Effects on access to medical services are potentially even more troubling than those on the cost of care, and some physicians may have withdrawn certain medical insurance policy services in response to malpractice fears. One of the defining features of the mid-1970s was the threat and occasional reality of a near strike by concerned physicians, especially in hospital-based and emergency practice. There are also many reports of physicians who have left practice early, have reduced their practices by eliminating riskier procedures, or have practiced “negative” defensive medicine by refusing to treat certain patients or certain conditions deemed at too great a risk of malpractice claim. (”Positive” defensive medicine, described above, consists of providing too many services— more than medically indicated.) Here again, the evidence is largely anecdotal and occurs against a backdrop of rapidly rising numbers of physicians seeking to practice.

Obstetricians are often said to be most affected. The American College of Obstetricians and Gynecologists (ACOG) has published results from national surveys of its membership in 1983, 198 and 1987, indicating that many physicians have indeed reportedly made changes. Among respondents, 27 percent had decreased their volume of high-risk obstetrical managed care plans and 12 percent no longer practiced obstetrics. One should recall that theACOG data were self-reported in an atmosphere of crisis and political mobilization. Moreover, although a physician who curtails his or her practice clearly loses access to certain patients, it is less clear that his or her former patients lose access to care. Virtually nothing reliable is known about impacts on patient access to care. It seems improbable, for example, that the birth rate has declined in many areas where obstetricians report cutbacks or that many babies have been delivered at home other than by the choice of the parents involved. There are stories, however, of patients having to travel long distances for long term care insurance or being dumped in public facilities. Another physician response is to “go bare,” or refuse to buy formal liability coverage, thus withdrawing on the demand side, just as insurance companies withdrew on the supply side. A small percentage seem to go bare, but documentation of this phenomenon is not good.

Before you purchase a medical insurance plan, consider the following most critical points, besides financial strength:

• First, ask yourself if you would rather keep your personal physician/doctor? Of course you are comfortable with a personal physician/doctor. Unfortunately, current doctor can not be included in the network of doctors who are accredited by your health plan. In this case, you should consider, or an HMO or PPO. (more…)

Generally, the healthier you are and the younger you are, the less you’ll pay for health insurance. If you’re married and both spouses work, compare policies offered by both employers. It’s best to go with the policy of the strongest company with the most benefits that charges the least out of pocket.

Here are some other ways to cut the cost of your health insurance cost: (more…)

As a medical transcriptionist, it’s your job to protect the privacy of the individual patient’s medical history. Therefore, HIPAA, the Health Insurance Portability and Accountability Act was established in 1996. Is this attempt to tighten medical privacy a good thing for employers? Yes and no. (more…)

Economic recovery stimulus legislation that President Barack Obama came into force last week brings along radical changes in Health Insurance Privacy and Portability Act. This act could be expensive for employers and their health care plan’s providers and partners. (more…)

The main difference between Health Savings Account and Flexible Spending Agreement is that the money is in an Health Savings Account with you. You have the control on how the money is invested. Recently, the increasingly volatile world health, health savings accounts are becoming more widely common and getting wide acceptance. First, a Health Savings Account can significantly reduce the cost of health care. (more…)

Most physicians have contracts with physician managed care plans. The Center for Studying Health System Change (2002) reported that 91 percent of physicians had one or more managed care contracts in 2001. On average, responding physicians had contracts with 13 managed care plans and received nearly 46 percent of their practice revenue from these plans. These reports are broadly consistent with earlier surveys conducted by the American Medical Association (AMA 1998), (more…)

Medicare has a practice to use internal and external audits to eliminate the possibility of waste and fraud in their program. There are some explanations to these audits purpose. Medicare program tries to apprehension vendors that are intentionally deceived to enter the system. A center for Medicare & Medicaid Services is also looking for vendors or suppliers that do not recognize for their own wrongdoing. (more…)

Do you know all the medical terminology, medical billing, hospital billing, insurance benefits, and insurance explanation like terms and condition? You need a medical billing advocacy service with their experience of this subjects. Getting the explanation for those subjects should not be so difficult, especially at a time when healthcare consumers are dealing with medical problems and healing or recovering from disease. (more…)