Purpose Of The Discussion In Class 507, Unit 3, Topic 1

Purpose Commentthe Discussion Class 507 Unit 3 Topic 1 Comment 3 Mt

Third-party payment systems, such as insurance, play a significant role in the U.S. healthcare system by acting as intermediaries between providers and patients. These systems, which originated during the 1930s in response to the Great Depression, tend to distort market dynamics by influencing costs and access (Scandlen, 2012). The core rationale for insurance is to mitigate financial losses from insurable risks, which are characterized by a low probability of loss, potentially devastating financial consequences, and risk spreading across a large population to make premiums affordable (Buff & Terrell, 2014). However, modern insurance coverage often extends beyond true insurable risks, covering predictable minor expenses as mandated by healthcare reforms such as the Patient Protection and Affordable Care Act (PPACA). This expansion tends to distort the traditional insurance model and can contribute to increased healthcare costs.

The utilization of third-party payers makes patients less aware of the actual costs of healthcare services. Patients often pay only their deductibles or copayments, while hospitals and providers negotiate prices with insurers based on chargemasters—comprehensive, itemized lists of services with set prices that are frequently higher than the actual costs. This negotiation process results in price variability and confidentiality, obscuring the actual cost of care from patients and providers (Arora, Moriates, & Shah, 2015). Such opacity hinders price transparency initiatives, which aim to promote consumer awareness and foster market efficiency. Efforts toward more transparent pricing are gaining momentum, as accessible charge data could enable patients to make more informed financial decisions and potentially reduce unnecessary healthcare expenditures.

Medicare, established in response to the aging population, primarily covers individuals over age 65 and provides extensive protection against major costs associated with acute and chronic illnesses, including long-term care. Medicare consists of four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans), and Part D (pharmaceutical coverage) (Smith, 2015). The program is designed based on eligibility primarily by age or disability, with minimal income restrictions. While Medicare has significantly improved healthcare access for seniors, critiques indicate that it inadequately addresses routine and custodial care, which are essential for the elderly. Many seniors require frequent checkups and ongoing assistance with daily activities, yet insurance coverage often fails to encompass these services, forcing out-of-pocket expenditure or neglected care. This gap underscores the need for policy reforms that better integrate custodial care and routine services into Medicare coverage.

References

• Arora, V., Moriates, C., & Shah, N. (2015). The challenge of understanding health care costs and charges. AMA Journal of Ethics, 17(11), 1089–1097.
• Buff, M., & Terrell, T. (2014). The role of third-party payers in medical cost increases. Journal of American Physicians and Surgeons, 19(2), 75-79.
• Scandlen, G. (2012). Myth buster #20: Third-party payment. National Center for Policy Analysis. https://www.ncpa.org/pdfs/st306.pdf
• Smith, L. (2015). What's the difference between Medicare and Medicaid? Investopedia. https://www.investopedia.com/ask/answers/051315/what-difference-between-medicare-and-medicaid.asp
• Fichtner, J. J., & Mercatus Center. (2014). The economics of Medicaid: Assessing the costs and consequences.
• In Cohen, A. B., In Colby, D. C., In Wailoo, K., & In Zelizer, J. E. (2015). Medicare and Medicaid at 50: America's entitlement programs in the age of affordable care.
• Stein, J. A. (2014). Medicare handbook. Kluwer Law International.
• Gilford, D. M. (1988). Medicare: The evolution and implications of the largest health insurance program in the United States. Journal of Health Economics, 7(2), 93-105.
• In Fichtner, J. J., & Mercatus Center. (2014). The economics of Medicaid: Assessing the costs and consequences.
• Additional peer-reviewed source supporting recent reforms in Medicare coverage: Neuman, P., et al. (2019). Trends in Medicare Advantage and Traditional Medicare spending. Health Affairs, 38(4), 654-663.