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Contact Us Fall 2000; Volume 1, Number 1
Glossary of Health Care Terms (cont.)
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Drug Formulary: A list of preferred pharmaceutical products that health plans, working with pharmacists and physicians, have developed to encourage greater efficiency in the dispensing of prescription drugs. Formularies can be classified as:
(1) "Open," in which doctors are encouraged to prescribe medications on the formulary but which allow nonformulary drugs to be covered without prior authorization,
(2)"Restricted," in which only medications on the HMO's formulary list are covered: and
(3)"Managed," in which doctors are encouraged to prescribe medications on the formulary, but nonformulary drugs are covered with prior authorization.

Employee Retirement Income Security Act (ERISA): A federal act passed in 1974 that established new standards and reporting/disclosure requirements for employer-funded pension and health benefit programs. To date, self-funded health benefit plans operating under ERISA have been held to be exempt from state insurance laws. This law essentially displaces state laws or regulations that "relate to any employee benefit plan."

Fee-for-service: Method of charging whereby a physician or other practitioner bills for each encounter or service rendered. This is the traditional method of paying for health services and contrasts with salary, per capita, or prepayment systems where the payment is not changed with the number of services actually used.

Federal Employees Health Benefit Plan (FEHBP): A health benefit program covering federal government employees.

Gag Rules: Rules within HMO contracts with providers that limit what providers can discuss with their patient. Through these contracts, HMOs could keep providers from disparaging the HMO, discussing expensive treatment alternatives, or revealing how the HMO pays the provider.

Gatekeeper: Term given to a primary care provider responsible for managing all referrals for specialty, ancillary, and hospital services.

Health Care Financing Administration (HCFA): Federal government unit within the Department of HHS that administers Medicare and Medicaid. Web site address is www.hcfa.gov.

Health and Human Services (HHS): A cabinet level agency within the Federal government that oversees the majority of health programs. For example: NIH, public health service, Medicare, Medicaid, Center for Disease Control, as well as many of the human services programs such as welfare cash assistance.

Health Insurance Portability and Accountability Act (HIPAA): A federal health benefits law passed in 1996, effective July 1, 1997, which restricts preexisting condition exclusion periods to ensure portability of health-care coverage between plans, groups, and individuals; requires guaranteed issue and renewal of insurance coverage; and prohibits plans from charging individuals higher premiums, co-payments, and/or deductibles based on health status. The legislation also establishes a four-year medical savings account (MSA) demonstration project.

Health Maintenance Organization (HMO): An organization that provides a wide range of comprehensive health care services for a specified group at a fixed periodic payment; prepaid health care plan under which people enroll by paying a set annual fee. They then receive all the medical services they need through a group of affiliated doctors and hospitals, often with no additional copayments or fees.

Inpatient Services: Services provided while the patient is admitted to the hospital.

Job Lock: A situation in which unhappy employees maintain they are trapped in unfulfilling jobs because they can not afford to give up their health benefits.

Kaiser Permanente: Founded in 1945, it is a non-profit, group-practice prepayment program with headquarters in Oakland, California. Kaiser Permanente serves the health care needs of approximately 7.4 million members in 17 states and the District of Columbia. Today, it encompasses Kaiser Foundation Health Plan, Inc; Kaiser Foundation Hospitals; and the Permanente Medical Groups. Nationwide, Kaiser Permanente includes more than 90,000 technical, administrative, and clerical employees, as well as 10,000 physicians representing all specialties.

Long Term Care: Non-acute, usually nonhospital based care of a custodial nature. These services are usually required by persons who are chronically ill, aged, or disabled, either physically or mentally, and in an institution or home on a long-term basis.

Major Medical Insurance: Health insurance to finance the expense of major illness and injury. Characterized by large benefit maximums, the insurance, above an initial deductible, reimburses the major part of charges for hospital, doctor, private nurses, medical devices, prescribed out-of-hospital treatment, drugs and medicines. The insured person as co-insurer pays the remainder.

Managed Care: Any form of health plan that initiates selective contracting to channel patients to a limited number of providers and that requires utilization review to control unnecessary use of health services.

Managed Competition: A health insurance reform proposal (developed by the Jackson Hole Group), whereby the purchasing power of consumers is increased or strengthened by enrolling the consumers in large cooperatives, each representing thousands of people. These cooperatives would be able to negotiate favorable deals with hospitals, doctors, and insurers. Management Services Organization (MSO): Any of the group practices, such as PPO, IPA, GPWW, or FIMG may decide to spin off its administrative and management functions into a separate entity called an MSO. An MSO may be owned by the physicians, by an insurer, by a hospital, or it may be a joint venture undertaken by a combination of these players. When the MSO is owned by the hospital, economic ties between the hospital and physicians are established, and a form of integrated delivery system (IDS) appears. Although the MSO may own the physician group's assets and run the businesses, the physicians remain the providers of care, and they retain the managed care contracts.

Medicaid: Title 19 of the Social Security Act. A program financed jointly by the federal government and the states that provides health coverage for mostly low income women and children, as well as low income elderly and low income disabled individuals. Funding, benefits, and the eligibility of low income people covered vary widely from state to state.

Medical Savings Account (MSA): An authorized federal government experimental program to allow people to accumulate taxfree funds to pay for their own medical care. The demonstration will last four years and is capped at 750,000 participants nationally. Contributions to the MSA, whether made by the employer or the employee, earn interest and are not subject to federal income taxes. The plan allows people to put pretax dollars into special medical savings accounts to pay their deductibles. Participants in the plan must be covered by insurance policies with annual deductibles of $1,500 to $2,250 for individuals and $3,999 to $ 4,500 for families. Both employers and employees could make tax-deductible contributions to the MSA (though not in the same year) of up to 65 percent of the amount of the deductible for individuals, 75 percent for consumers with family policies. Cash contributions into an MSA are tax deductible and interest earnings accumulate tax-deferred. Withdrawals from an MSA account for qualified medical expenses are free from federal income tax. Any money not used for medical expenses in one year can be carried over and invested, like money in an IRA.

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