Health Care Finance and Reimbursement

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Updated: Mar 28, 2022
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Revenue Sources and Purpose

Medicare is a federal program that was created to pay for health care for elderly Americans as well as younger ones with disabilities. At age 65, automatic enrollment is initiated. It covers 49 million people, of whom a little more than 8 million are disabled and just over 40 million are 65 years or older (Casey, 2015). Payroll taxes and other government disbursement is utilized for coverage. Medicare is very helpful for the aging population as well as individuals with disabilities.

Medicaid covers just over 68 million low income Americans of any age (Casey, 2015).

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The federal government and state share the cost of Medicaid. In order to qualify for Medicaid, you must have an income that falls within a specific percentage of poverty level. The poorer states receive more funding than the richer states. Medicaid is advantageous for low income families. However, not all providers accept this form of insurance and it may be difficult to establish care with a primary provider due to the office not accepting new patients.

Managed Care plans are a type of health insurance that have contractual agreements with the hospital and specific health care providers. These agreements are devised to extend quality care while maintaining cost. Examples of managed care programs include Preferred Provider Organization (PPO) that cover more when you seek care within the network but will pay at a reduced rate if you choose to go outside the network. Health Maintenance Organizations (HMO) that only pay for in network facilities and providers. Point of Service (POS) offers a choice of (HMO) or (PPO) when you are in need of care. HMOs and PPOs grew rapidly, with commercial HMO enrollment increasing from 15.1 million in 1984 to 63 million in 1996 and 104.6 million in 1999 (Kongstvedt, 2013).

Process for Reimbursement

Most claim forms are submitted for the patient directly to Medicare for the services received. Medicare claims must be filed no later than 12 months or 1 full calendar year after the date when the services were provided (Medicare.Gov, 2019). It can take 30 days for the claim to be processed. The patient is responsible for their out of pocket deductible and copay. To compute the payment for services, (CMS) multiplies the combined costs of that service by an annual conversion factor or dollar amount, and then adjusts the result to reflect different costs for different geographic areas (Groves, 2006).

There is a physician payment scale for Medicare called the Resource Based Relative Value Scale (RBRVS) that is a completely separate part of the reimbursement process. Managed care reimbursement can vary based on negotiations between service providers and the insurance carrier. HMO plans negotiate different ranges of coverage for a set monthly rate. The effort that must be carried out by hospitals to maintain its sustainability is by applying efficiency in all aspects without neglecting the quality of service and maximizing claims without fraud (Friskasari et al., 2019). Claims must include the date and location of service, provider name and address, treatment received and a diagnosis written by the physician.

Program Benefits for Patients and Health Care Organizations

Many individuals will experience some type of a health issue that was not expected. Testing and treatment can be very costly. Obtaining healthcare insurance can protect you financially if this should occur. Additional benefits come in the form of education and disease management for conditions such as diabetes, hypertension and heart failure to name a few. Some plans offer incentive rewards such as cash back for individuals that do not consume nicotine. Based on deleterious health effects combined with substantial prevalence, cigarette smoking represents a major worldwide cause of death (Guillermo, 2011).

The hospital system will benefit only if cost containment is a primary focus when delivering care. In doing so, quality of care cannot be sacrificed. Ensuring unnecessary supplies are not utilized may be helpful in decreasing the cost of care. Due to Medicare and Medicaid reimbursement cutbacks, providers may struggle to break even on the cost for services rendered. Over the past five years, many health care providers have experienced increases of 10 percent or more to their self-pay accounts receivable (DeSoto, 2016).


Healthcare Providers and patients can benefit from obtaining a solid understanding of how these individual health insurance programs work. Deductible and copay amounts are important for both parties to be aware of when seeking treatment. Knowledge is an effective way to empower a patient regarding their care. Finding the right provider and knowing when and where to seek treatment is a must. Creating a trusting relationship between the patient and provider will help drive positive patient outcomes.


  1. Casey, M., & ProQuest Ebooks. (2014;2015;). Medicare and medicaid: How can we afford them? Ashland, Oregon: National Issues Forums Institute.
  2. DeSoto, R. (2016). The problem with patient self-pay: Self-pay management makes a huge difference in bottom line. Healthcare Registration, 25(5), 6.
  3. Friskasari, E. L., Suryawati, C., & Setyawan, H. (2019). The implementation of lean management in accelerating health insurance claim process at hospitals. JMMR (Journal Medicoeticolegal Dan Manajemen Rumah Sakit), 8(3), 198-209. doi:10.18196/jmmr.83107
  4. Groves, N. (2006). Medicare reimbursement process considered top AAO priority. Ophthalmology Times, 31(6), 10. Retrieved from
  5. Guillermo, Bastida Belen Beltran. (2011) Ulcerative colitis in smokers, non-smokers and ex-smokers. 17(22), 2740-2747. doi:10.3748/wjg.v17.i22.2740
  6. Kongstvedt, P. R., & Skillsoft Books. (2013). Essentials of managed health care (6th ed.). Burlington, MA: Jones and Bartlett Learning.
  7. How do I file a claim? (2019) Retrieved from
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Health Care Finance and Reimbursement. (2021, Oct 18). Retrieved from