Financing System for Healthcare Services

Health financing is significant to the health system’s ability to improve and maintain
human welfare. Without the funds in extreme cases, it would be a challenge to employ health
workers, medicines would not be available, and there would be no health prevention and
promotion programs. Health financing is a wider scope which not only focuses on generating
funds but also ensuring the sustainability of the operations. In the United States, healthcare costs
are higher compared to other nations, which impacts the overall economy negatively. The higher
costs make the healthcare provision unsustainable, which is a challenge to the financing systems.
The various payment mechanisms or systems for healthcare available in the United include
private insurance, government insurance programs, and the people themselves, also known as
out-of-pocket funds.

Payment Mechanisms for Healthcare Available in the United States
The first payment mechanism is private insurance, which the users purchase from for-
profit insurance companies and not-for-profit entities. Each state has a limited number of
insurance companies despite their rising existence in America. Corporations or employers mostly
purchase private insurance as a benefit for employees, and they share the cost. In 2014 the U.S.
government, through legislation, ratified the Affordable Care Act (ACA) to enhance the
affordability, use, and availability of health insurance. The provision of ACA entails private
insurance market expansion, which enables employers to provide health insurance, and allows
individuals not covered to purchase health insurance (National Library of Medicine, 2017). The
second payment mechanism for healthcare in the U.S is government insurance programs. The
biggest government insurance programs are Medicare and Medicaid. Medicare primarily funds
the healthcare for disabled, elderly, and individuals receiving chronic treatment with dialysis.

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Additional government programs include Veterans Health Administration, Tricare, Indian Health
Service, and Health Insurance Program for State Children. Finally, out-of-pocket is another
payment mechanism for healthcare in the U.S. Patients can pay out of their funds when they do
not have cover from other sources. Mostly, they use savings to pay small bills, and for large bills,
they can borrow. Health savings accounts and flexible spending accounts are also mechanisms
for paying out-of-pocket expenses.

Options Available to Providers for Reimbursement of Their Services
The three options available to providers for reimbursement of their services include Fee
for Service (FFS), Capitation, and Bundled Payments. In the FFS reimbursement, the revenue of
a physician bases solely on the specific procedures they perform. Each given service a client or
patient receives has a matching code and attached price. For instance, services such as a
urinalysis, tetanus shot, and consultation have distinct prices and codes attached to them.
Besides, the insurance of a patient determines the amount a health practitioner gets for any given
service. Centers for Medicaid or Medicare always decide the prices per code, whereas private
insurance companies set their prices per code as Medicare price percentage. FFS reimbursement
is volume-based since care providers only have to increase the number of services they offer to
increase their revenue (Porter & Kaplan, 2016). A provider must also provide a justification for
the procedures offered on the various diagnoses. Secondly, capitation is a reimbursement method
whereby a provider receives payment to cover all relevant services for a given population within
a given time period. For instance, a physician’s office has 80 patients, and the physicians get
paid $35 per month for each patient to cover all their costs for a period of one month. In this
case, there is no direct connection between the payment amount and the number of services
offered. A provider will still receive $35 even whether one patient incurs $0 while another incurs

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$2000. Capitation differs in form as some cover only professional fees, and others cover all
medical expenditures for a patient in the facility (Porter & Kaplan, 2016). The third
reimbursement option for service providers in the bundled payments is also referred to as
episode-based payments. The reimbursement is based on expected expenditure for clinically-
defined care episodes. The episodes cover vast conditions such as hip replacements, organ
transplants, and maternity care, among others. If the required amount for an organ transplant is
$20,000, for example, then the physician would receive $20,000 for every organ transplant
despite some transplants being more or less expensive. Bundled payment, in most cases, is a
combination of capitation and fee for service reimbursement.

Approaches to Decreasing Healthcare Costs over the Last Few Decades
The first approach to decreasing healthcare costs over the last few decades is through
treating hospitals as last-resort providers. In the U.S., hospitals consume over half of the
healthcare spending since, in any expenditure, there is a percentage that goes to hospitals. For
instance, physicians and clinics receive large amounts of money in every government spending
on healthcare. More dollars also go to non-physician providers such as occupational therapists,
nurse practitioners, and optometrists. However, despite the large spending on hospitals, they are
not the best care places as there are lower-cost facilities such as imaging centers or day surgery
centers. Therefore, the hospital should not remain the primary hub for service provision or
treatment since treatment centers for surgeries are viable and less costly. The second approach is
moving care closer to patients. Most companies need to have clinics within their setting where
employees can readily access care rather than having to travel to hospitals (Gwynne & Agha,
2019). Besides, creating online sites such as Optum and CVS Health is essential in reducing
healthcare costs since patients need not travel far away to seek certain medical attention or

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consultation that are readily available on the sites. Lastly, focusing on the continuum of care is
instrumental in decreasing healthcare costs. Patients need to research their medical conditions
and take early precautions before going for the actual treatment (Gwynne & Agha, 2019). For
instance, a patient who needs surgery ought to have prepared 30 days earlier to ensure smooth
surgery operation without incurring much cost. Focusing on holistic care rather than waiting for
actual treatment is crucial to reducing healthcare costs that have been on the rise over the last
few decades.
In conclusion, Savvy nurse managers have remained crucial in the management of health
financing in the U.S. Knowledge in financial management has ensured nurses to be vigilant on
the spending and payment for healthcare services. Problems related to reimbursement have
tremendously declined since the savvy nurse managers create budgets that conform to the
services they offer to patients. As a result, there is always continuity in service provision in the
facilities without any financial challenge. Moving forward, all nurse managers should have the
financial acumen to avoid any healthcare challenges associated with funding. Savvy nurse
managers apply both their nursing and financial skills to offer utmost care to patients without any
constraint or challenge during service provision.

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References

Gwynne, M., & Agha, Z. (2019). The Physician Perspective on Reducing Healthcare
Costs. Generations, 43(4), 24-29.
National Library of Medicine. (2017). “The U.S health Care Financing System.” Nlm.nih.gov.
Retrieved on February 18, 2021, from
https://www.nlm.nih.gov/nichsr/edu/healthecon/02_he_01.html
Porter, M.E & Kaplan R.S. (2016). “How to Pay for Health Care.” Hbr.org. Retrieved on
February 18, 2021, from https://hbr.org/2016/07/how-to-pay-for-health-care