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To effectively budget, nurse managers must understand where healthcare dollars come from. Normally, when you purchase something—whether it's food at the grocery store, a new pair of shoes, or a car—you provide payment for that item at the time of purchase. With healthcare, however, things work a bit differently. Typically, when someone receives healthcare services, payment for those services is rendered later, either by the person's insurance company, government health programs, or out of the patient's pocket. This is known as reimbursement. A healthcare facility's reimbursements represent the bulk of its revenue.

This chapter provides an overview of political factors, historical and current, that affect healthcare policies and processes in the United States, including reimbursement. The chapter then outlines the history of healthcare reimbursement in the US, covering the following topics:

  • Per diem reimbursement

  • Diagnosis-related groups (DRGs)

  • Medicare and Medicaid

  • Managed care

  • Health maintenance organizations (HMOs)

  • Preferred provider organizations (PPOs)

  • Capitation

  • Accountable care organizations

It is important for nurses to understand both the political context and the history of healthcare reimbursement in the US. Unlike the vast majority of countries in Europe, which have single-payer healthcare systems, the US has a market-driven entrepreneurial healthcare system, with each state acting more or less like its own country. Legislation at both the federal and state level has shaped healthcare reimbursement in the US. Gaining an understanding of where and when healthcare reimbursement began is critical to understanding where healthcare is today, and more importantly, where it is going in the future.

U.S. Healthcare: A Political Primer

Healthcare policy and financing are intricately intertwined. For example, in Europe and most Western countries, healthcare is a politically won universal right, with the government being the major guarantor of reimbursement. In the US, however, the political consensus has traditionally favored a market-based approach to healthcare financing, with the individual being responsible to pay for care—either personally or through third-party arrangements with employer-provided healthcare plans or directly with insurers. Public sentiment and political will in the US have resulted in a diversion from a pure market-based approach when it comes to vulnerable populations and healthcare reimbursement, however. Older Americans and those with disability are covered by federal funds allocated to Medicare. Low-income persons are covered by a mix of federal and state funds allocated to Medicaid. Both Medicaid and Medicare are discussed later in this chapter.

Healthcare also carries with it political and social costs. These costs include the loss of individual income, the cost of medical care itself, and the cost of illness to society such as income interruption and decreased productivity. Social costs are also associated with lack of access to healthcare, such as poorer health and shorter life expectancy.

To better understand healthcare reimbursement, it helps to know the general political history of healthcare in the US. This section reviews that ...

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