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Reimbursement Methodologies

Current Practices in Healthcare Reimbursement

In the United States, the providers of healthcare often receive money from insurance or government after the provision of service through the system of reimbursement. The providers offer medical services to patients and file claims for compensation with insurers and government. The U.S. healthcare system utilizes many payment mechanisms which reimburse according to the quality, quantity, and complexity of the care that the patient receives (Britton, 2015). Today, reimbursement practices underscore the importance of quality and consumer satisfaction rather than the number of services that providers offer to patients.

Evolution of Healthcare Reimbursement Practices

Healthcare reimbursement practices in the United States began as early as the mid-19th century. The growing public demand for health insurance coverage compelled some insurance companies to offer health care plans for rail and steamboat accidents. The U.S. would later adopt the principle of mutual aid society which had become effective in Europe (Health Economics, 2013). In this model, members of the society made little contributions in return for a cash benefit in the event of sickness or death. Significant growth in health insurance occurred in the late 19th century with the rise in accident and health insurance.
Amendments to the Social Security Act of 1935 in the mid-20th century provided a framework for states to issue direct payments to physicians, nurses, and healthcare institutions as opposed to welfare recipients. Further development in healthcare insurance and reimbursement practices occurred in the 1960s with the enactment of Medicare and Medicaid (Health Economics, 2013). The Medicare plan contained the Democratic proposal for comprehensive health insurance and the government-subsidized voluntary health insurance.

In the 21st century, the administration of President George Bush pursued a consumer-driven health care plan in which consumers would pay for their health expenses. The plan also seeks to protect the elderly from the escalating cost of prescription drugs. At the same time, new reimbursement programs began to emerge in which physicians were reimbursed based on performance (Health Economics, 2013). The focus on quality became paramount, and it began to replace older practices that reimbursed doctors and physicians regardless of the quality of services and patient satisfaction.

Reimbursement Models

The United States has many reimbursement models by which providers of care can seek payment. According to Britton (2015), such models include capitation, free of service, consumer self-pay, and aggregated caps. No single system of reimbursement has been acclaimed universally.


This model offers a payment system for physicians and nurse practitioners that constitute healthcare providers. In this arrangement, the provider gets payment (usually a fixed fee) for the services that they offer irrespective of the quantity and complexity of the services. Such payment is made for every patient enrolled for them regardless of whether the individual will seek care or not. The independent practice association usually enlists providers to offer health care services to patients enrolled under health maintenance organization (HMO) (Casto& Forrestal, 2013). Large payments are done for patients with significant medical history. The focus of capitation is on preventive health care as opposed to treatment. In this regard, the plan prevents providers from using expensive treatment options.

Fee for service (FFS)

Under this payment arrangement, physicians offer treatments to patients, and they receive payment for each service they provide. Such services include tests and office visits. The focus of FFS is on the quantity of care as opposed to the quality of care and physicians can provide more treatments to patients. It is the most commonly used reimbursement model in the United States because the services are unbundled (Britton, 2015). The effectiveness of FFS in improving the quality of care has not been sufficiently determined in research due to the mixed conclusions that it generates. However, the model offers physicians incentives to provide care due to the payment they get for every service they provide.

Aggregated caps

Aggregated caps are based on aggregate limits that an insurer will pay to cover for the losses that are incurred in the life of a policy. Most aggregated limits run for a year, and the insurers can set caps on both individual and aggregate claims for the entire period of the policy. In this regard, the insurer can only reimburse an amount of money equal to but not exceeding the sum contemplated in the aggregate caps. Healthcare plans that rely on this model have a cap on each claim payment and a limit for annual claim payments (Casto& Forrestal, 2013). In this regard, a family seeking healthcare service have a yearly aggregate limit of claims that they are required to pay. In case the family exceeds the limit, they cannot receive reimbursement for the additional payment until the subsequent policy begins.

Consumer Self-Pay

This model describes the out-of-pocket payments that consumers make for healthcare services. According to Casto and Forrestal (2013), such consumers usually have little or no insurance coverage and are compelled to pay for the total costs of healthcare. In most cases, self-pay markets do not guarantee consumers benefits such as discounted rates that are the hallmarks of negotiated health plans. The consumers shop for health care services and make preferences based on the types of services they require and the affordability of the services.

Methods of Policy Change that Impact Reimbursement

Policy changes in the health care system have a significant impact on reimbursement methodologies. Reimbursement determines the healthcare products that are in the process of development and whether such products can eventually make it to the market (Bruen et al., 2016). The U.S. Congress can undertake significant changes in healthcare policies which can potentially impact reimbursement practices. For instance, despite President Clinton’s attempt to enact a comprehensive health care legislation in the late 20th century, the subsequent administration of President Bush did not express any willingness to accomplish his predecessor’s vision (Preskitt, 2008). Instead, the Republican-led Congress focused on a consumer-pay reimbursement method. The enactment of the Affordable Care Act under President Barack Obama underscored the concept of patient-cost sharing as a suitable approach to healthcare reimbursement. It brings consumers and insurers to share costs of healthcare through deductibles and fixed co-payments.

Current Initiative related to Role of Government
The politics around healthcare regulation and reimbursement has been ongoing for decades. The Republican displeasure with the inefficiency of the affordable care act (especially on the issue of the individual mandate) inspired the administration of President Donald Trump to introduce changes to the ACA with significant impact on reimbursement. The administration has made efforts to undo sections of the law that has resulted in large deductibles and penalties on Americans who cannot afford to buy insurance. The danger with such a significant policy undertaking is that many Americans could soon go without insurance coverage and it could present an enormous burden on the country’s healthcare system.

Future of Healthcare Reimbursement

The back-and-forth politics between Republicans and Democrats around the issue of health care legislation imply that the path to stable and comprehensive healthcare legislation is dim. The future of healthcare reimbursement and the role of government depend primarily on bipartisan Congressional support. Both the Republican government and a Democratic government require the political goodwill of the House to develop and sustain healthcare reimbursement practices and methodologies.


Britton, J. R. (2015). Healthcare Reimbursement and Quality Improvement: Integration Using the Electronic Medical Record: Comment on” Fee-for-Service Payment-an Evil Practice That Must Be Stamped Out?”. International journal of health policy and management, 4(8), 549.

Bruen, B. K., Docteur, E., Lopert, R., Cohen, J., DiMasi, J., Dor, A., …& Shih, C. (2016). The impact of reimbursement policies and practices on healthcare technology innovation.

Health Economics.(2013). History of Healthcare Financing in the United States. Retrieved from https://www.pharmpress.com/files/docs/health_economics_sample.pdf

Casto, A. B., & Forrestal, E. (2013). Principles of healthcare reimbursement. American Health Information Management Association.

Preskitt, J. T. (2008, January). Health care reimbursement: Clemens to Clinton. In Baylor University Medical Center Proceedings (Vol. 21, No. 1, pp. 40-44).Taylor & Francis.