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Contact Us Fall 2000; Volume 1, Number 1
Glossary of Health Care Terms (cont.)
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Medically Necessary or Medical Necessity: A contractual term insurers use to determine what to cover. The following are examples of definitions of medical necessity or medically necessary benefits:
(1)appropriate for the symptoms, diagnosis, or treatment of a medical condition;
(2) provided for the diagnosis or direct care and treatment of the medical condition;
(3) within the standards of good medical practice within the organized medical community;
(4) not primarily for the convenience of the patient's physician or other provider; and
(5) the most appropriate procedure, supply equipment or service which can be safely provided.

Medicare: The federal government's hospital and medical insurance program for the aged, totally disabled, and those with end-stage renal disease. There are three parts—A, B, and C. Part A is the hospital portion and is mandatory for all eligible. Part B is the physician portion and each eligible beneficiary can decide to participate in or not. Those who elect part B coverage pay an additional premium to the federal government. Part C is the managed care portion of the program and is referred to as Medicare and Choice.

Medicare Catastrophic Coverage Act: Federal legislation enacted in 1987 to provide full coverage under Medicare for high cost hospital care after calendar year stop-loss. It also included a phase-in of coverage for outpatient prescription drugs. This act represented departure from earlier financing, because legislation required full cost to be covered by mandatory beneficiary premium and income surtax. It was repealed in 1989.

Medicare Part A: The hospital coverage portion of the Federal Medicare program. It covers inpatient hospital and physician services subject to an annual deductible. Coverage is mandatory for all Medicare eligibles and is financed through Federal revenues.

Medicare Part B: The physician and other nonhospital benefit portion of the Federal Medicare program. It covers physician services up to an allowable amount, determined by the government. Coverage is voluntary and financed primarily by premiums paid by participating baneficiaries.

Medigap Policy: A private health insurance policy designed to pay for the copayments and deductibles required by Medicare. Some additional non-covered services may also be paid for. Also known as Medicare Supplement Policy, or Medicare Wrap. The design and content of these plans are regulated by federal law.

Moral Hazard: Evidence of information market failure within the health insurance market. The more complete an insurance coverage package the less individuals must bear the financial consequences of their consumption decisions thereby reducing the incentive to economize in consumption of health services.

National Health Insurance: A term generally used to describe any system that would provide a government financed system providing all Americans access to an agreed upon standard of health care benefits.

Nurse Anesthetist: A registered nurse, educated and certified to practice anesthesia. Nurse Anesthetists administer more than 60 percent of all anesthetics in the country. Nurse anesthetists are not required to be supervised by an anesthesiologist, however, more than half the states mandate that they work under the direction of a surgeon or other physician.

Outpatient Services: Services provided for a patient who is receiving ambulatory care at a hospital or other health facility without being admitted to the facility.

Pharmacy Benefits Manager: Designs and manages the pharmacy (drug) benefits for an HMO. Develops pharmacy networks, negotiates prices with manufactures, establishes drug formularies, monitors physician prescribing patterns and patient compliance, designs benefits, and manages outcomes.

Point of Service (POS): A benefit plan design that combines HMO and PPO features to permit the member to select the desired provider-payment combination each time the member seeks care. The highest level of benefits is received when the member obtains services at the direction of his or her designated primary care physician.

Pre-Existing Condition: A physical and/or mental condition of an insured individual which first manifested itself prior to the issuance of his/her policy. Some pre-existing conditions may be excluded from coverage.

Preferred Provider Organization (PPO): A delivery system where providers are under contract to an insurance company to provide care at a discount or for a fixed fee, and the insurance company provides incentives to patients to use the contracting providers. The PPO does not assume insurance risk, and it does not facilitate the sharing of risk by its members.

Premium: The periodic cost of an insurance policy for a covered individual or specific risk; may be monthly, quarterly, semi-annually, or annually.

Primary Care: Basic care including initial diagnosis and treatment, preventive services, maintenance of chronic conditions, and referral to specialists.

Primary Care Physician or Practitioner (PCP): A doctor designated by an HMO or other managed health care company to be the first physician a patient contacts for any medical problem. The doctor acts as the patient's regular physician and as a gatekeeper who determines if the patient needs to see a specialist or requires hospitalization.

Provider Sponsored Organization (PSO): A cooperative effort between hospitals and doctors, similar to HMOs except they are run by doctors and hospitals. They are touted as particularly valuable for rural areas, which have not attracted HMOs.

Risk Adjustment: The mechanism for compensating plans for differences in risk, as measured by risk assessment.

Risk Assessment: Measuring the expected health care costs of an individual's enrollment in a plan, frequently through the use of demographic variables and health status information.

Risk Selection: Insurers attempt to exclude or discourage enrollment by refusal to renew coverage based on health status or claims experience, targeted advertising and marketing, benefits design, and plan operation.

Skilled Nursing Facility (SNF): An institution (or a distinct part of an institution) that is primarily engaged in providing skilled nursing care and related services for patients who require medical care, nursing care, or rehabilitation services.

Staff Model HMO: This health care model employs physicians to provide health care to its members. All premiums and other revenues accrue to the HMO, which compensates physicians by salary and incentive programs.

Stop-Loss Provision: Any arrangement where the insurer provides coverage for claims in excess of predetermined limits. Such coverage may be aggregate (e.g., 125% of expected) and/or specific (e.g., $25,000 per case).

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