Essay About Historic Payment System And Much Money

Health Care
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The historic payment system for reimbursing hospitals both by insurers and by Medicare
has been Retrospective Cost Based Reimbursement(RCBR). This system of reimbursement
encourages hospitals to over charge in order to cover the costs of the uninsured who utilize the
hospital. Charges have continued to rise year after year eventually putting the employers at a point
where they could no longer afford the payments.
For physician reimbursements, both insurers and Medicare employed the Usual and
Customary(U+C) approach to reimbursement. This practice, which averaged the charges for a
procedure in a region, also encourages doctors to over-charge in order to raise the average amount
paid to them for a procedure. These two systems, RCBR and U+C eventually started to suck too
much money out of the insurers, employers, and the Medicare/Social Security trust fund so that
interventions were deemed necessary.
Perhaps the biggest intervention adopted by the private sector to reduce medical service
costs was the trend toward businesses self-insuring. By doing so, they avoided state-mandated
benefits that were required if they hired a third-party insurer. In addition, the money was now paid
to claims as they arose rather than prospectively so income could be earned on this capital as it sat
in the bank.
Other intervention to reduce medical service costs mainly involved private insurers as it
was difficult for small businesses to self-insure because of low-capitol. Underwriting was a typical
practice of insurance companies; that is, excluding some employees from coverage if they have
preexisting