Glossary of Health Care Terms
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
340B Drug Pricing Program
A federal program that requires drug manufacturers participating in the Medicaid drug rebate program to provide medications at discounted prices to certain designated nonprofit hospitals and other providers.
510(k) Pathway
Expedited FDA approval process for medical devices whereby manufacturers have to prove new products are substantially equivalent to ones already on the market.
A
Abbreviated New Drug Application (ANDA)
A form submitted to FDA as part of the generic drug approval process. These applications are called “abbreviated” because a manufacturer is usually not required to include animal and human data to establish safety and effectiveness. Instead, a generic applicant must show that its product is bioequivalent, meaning that it is the same as a brand-name drug in dosage, quality, strength, intended use, and how it performs in the body.
Accountable Care Community (ACC)
Similar to Accountable Communities for Health, ACCs are partnerships between counties or other localities with the private sector (e.g. health systems, employers, etc.) to align their services, programs and workforce to address the community’s needs. They often focus on one or several specific goals such as obesity, education, safe streets, and/or economic vitality. This model stresses shared responsibility and involvement across all facets of the community.
Accountable Care Organization (ACO)
Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers working together to manage and coordinate care for a group of patients, across the entire spectrum of care. Physicians and providers in the ACO are financially rewarded if they meet cost and quality benchmarks. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. Primary care doctors are put at the hub of coordinating patient care.
Activities of Daily Living (ADLs)
Activities people tend to do every day with little or no assistance, such as eating, bathing, dressing, toileting, walking, and continence
Actual Drug Acquisition Cost (AAC)
The net cost of a drug paid by a pharmacy. A drug’s AAC includes discounts, rebates, chargebacks and other adjustments to the price of the drug, but excludes the pharmacy’s dispensing fees.
Actuarial Memorandum
This is the main component of a health insurance premium rate filing; this includes exhibits setting forth the data, assumptions, estimates, and calculations on which the rate increase is based.
Actuarial Value (AV)
Actuarial value measures the percentage of covered medical services that a health plan will cover for a standard population. AV can be considered a general summary measure of health plan generosity, and it is used to categorize plans sold on individual and small group markets into coverage tiers. However, it is important to note that an individual patient may be responsible for a higher or lower percentage of the total costs of covered services for the year, depending on actual health care needs and the terms of the insurance policy.
Administrative Spending
Costs incurred by insurers, hospitals, doctors’ offices, patients and other entities to conduct the business side of health care. This spending includes both Billing and Insurance Relating (BIR) spending and Other Administrative spending.
Adverse Event
Unintended physical injury resulting from or contributed to by medical care (includes the absence of indicated treatment) that requires additional monitoring, treatment, or hospitalization or that results in death.
Affiliation Agreements
An alternative form of integration that does not involve transfer of assets or full control. Examples include operating agreements, management-service agreements and other options.
Affordability Standard
A measure that identifies the point at which goods or services become unaffordable given people’s income, spending and judgments about the value of the goods and services for their price.
Affordable Care Act (ACA)
The comprehensive health care reform law enacted in March 2010. Formally known as The Patient Protection and Affordable Care Act, the ACA established a number of pilot programs, rules, and other initiatives that have benefitted all Americans by encouraging high-value, patient-centered care.
All-or-Nothing Clauses
When health systems require plans to contract with all providers in their system or none of them, even if those providers are low-value or high-cost.
Allowed Amount
The amount on which payment is based for covered healthcare services. This may be also called “eligible expense,” “payment allowance,” or “negotiated rate.”
All-Payer Claims Database (APCD)
APCDs are large databases that can include claims data from private insurance companies, state employee health benefit programs, Medicare and Medicaid. APCDs provide a wide range of payment, utilization and disease pattern information that can be used to monitor health care spending and identify price variation in health care systems, among other activities. When the database does not include data from all provider types, it is referred to as a multi-payer claims database.
Alternative Payment Model (APM)
Alternative-payment models (APMs) refer to new ways of paying providers (hospitals and doctors) that seek to reward for improved outcomes and quality, rather than the amount of care they provide.
Ambulatory Payment Classifications (APCs)
Medicare procedure or service classification system used by hospitals to seek reimbursement for outpatient care based on predetermined rates per service. Most services paid under Medicare Outpatient Prospective Payment Systems (OPPS) are reimbursed under APCs.
Annual Limits
The maximum amount an insurance plan will provide in benefits in a year. The health law no longer allows plans to have annual dollar limits, but service limits are still permitted. Some grandfathered plans may still be allowed to have annual limits, and annual limits are still permitted for “nonessential benefits” such as dental care.
Anticompetitive Practices
Business practices that lead to higher prices, reduced quality or levels of service, or less innovation.
Anti-Kickback Statute
The federal criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business.
Anti-Tiering and Anti-Steering Clauses
Contract provisions that require insurers to place favored providers in higher tiers regardless of cost or quality (anti-tiering) and restrict directing patients to higher value care from competitors (anti-steering).
Antitrust Enforcement
Antitrust enforcement is the process by which a more competitive environment is created through the prohibition of certain practices deemed illegal by antitrust laws. When it comes to insurance companies, special rules apply. The McCarran-Ferguson Act exempts the business of insurance from most federal regulation, including federal antitrust laws to a limited extent.
Antitrust Laws
Laws that require scrutiny of anticompetitive mergers and practices. These laws include the Sherman Antitrust Act, the Clayton Act, and the Federal Trade Commission Act.
Any Willing Provider Laws
Laws that require insurers to contract with all interested providers, thereby reducing the bargaining power of insurers.
Authorized Control Level (ACL)
The legal minimum surplus an insurer must hold to do business.
Average Drug Sales Price (ASP)
The average sales price is derived from the sales from manufacturers to all purchasers and includes practically all discounts, but is limited in that it is only available for Medicare Part B covered drugs.
Average Drug Wholesale Price (AWP)
This is a measurement of the price paid by pharmacies to purchase drug products from wholesalers in the supply chain.
Average Manufacturer Drug Price (AMP)
The average price paid to a drug manufacturer by wholesalers and retailers who buy direct from manufacturers. AMP is a benchmark created by Congress in 1990 in calculating Medicaid rebates and is not publicly available.
B
Balance Billing
When a patient receives services from a doctor or hospital that does not participate in their insurer’s network and the provider is not obligated to accept the insurer’s payment as “payment in full,” the provider may “balance bill” the patient for the remaining, unpaid amount. For example, when you receive services from a doctor or hospital that does not participate in your insurer’s network, that provider is not obligated to accept the insurer’s payment as payment in full and may bill you for the unpaid amount. This is known as “balance billing.” Some states prohibit providers from billing consumers under certain circumstances, for example for emergency services.
Basic Health Plan (BHP)
A state-administered health coverage program authorized under Section 1331 of the Affordable Care Act (ACA) that provides affordable insurance for low-income residents who would otherwise qualify for Marketplace coverage. The BHP is designed to enhance continuity of care for individuals whose incomes fluctuate above and below Medicaid and CHIP eligibility levels.
Benchmark Price
A rate used as a reference point for reimbursement rates. For example, setting rates at 110% of the Medicare benchmark price.
Benefit Design
Benefit design is term that incorporates several features of a health plan, like patient cost-sharing, scope of coverage services, service limits (e.g., number of visits) or subscriber incentives to use network providers.
Biologics
Complex products made from living organisms that are considered a cutting-edge form of medicine, revolutionizing treatments for cancer, arthritis, multiple sclerosis and other conditions. Although these drugs can sustain and improve the quality of life for many patients, they are expensive—sometimes costing $100,000 or more annually.
Biosimilars
A biosimilar is a product that has the same general qualities of a biologic. Conceptually, a biosimilar is sometimes—incorrectly—said to be a “generic” of a biologic. A biosimilar does not have the precise replication of a biologic that a generic has for a chemical drug. These are drugs that have the same mechanism of action as the original, or reference, biologic treatment. Analogous to generics for small molecule drugs.
BIPOC
An acronym that stands for Black, Indigenous and people of color. The term is used to describe people who are nonwhite or of non-European descent.
Blended Financing
Blended financing receives money from multiple sources to pay for related services (for example, housing supports) but combines it into a single funding pool or stream. This allows for minimal administrative oversight and maximum flexibility.
Bona Fide Service Fees
Payments from drug manufacturers to pharmacy benefit managers (PBMs), specialty pharmacies and other service vendors in Medicare Part D (and other government drug programs) for an array of patient and product support “services,” such as rebate administration, inventory, drug shipping, reimbursement/financial assistance, patient education, phone support and data reports. The only major financial item excluded from Part D “negotiated price” calculations.
Braided Financing
Under braided financing approaches, several funding streams are combined to pay for related services (for example, housing supports). This model keeps the funds in different streams so they can be tracked separately at the administrative level.
Bundled Payment
In a bundled payment methodology, a single, “bundled” payment covers services delivered by two or more providers during a single episode of care or over a specific period of time. For example, if a patient has cardiac bypass surgery, rather than making one payment to the hospital, a second payment to the surgeon and a third payment to the anesthesiologist, the payer would combine these payments for the specific episode of care (i.e., cardiac bypass surgery). In short, this payment model utilizes a single fixed payment covers all services delivered by multiple providers for a specific episode of care or treatment. This approach encourages care coordination and cost containment by reimbursing providers collectively rather than separately for individual services. See also: Capitation, Condition-Specific Capitation, Episode-Based Payments.
Bundled Payment for Care Improvement (BPCI)
A Medicare initiative established by the Center for Medicare & Medicaid Innovation in 2013 that reimburses providers a fixed amount for all services associated with an episode of care. Payments are linked to quality performance, aiming to incentivize cost-effective, coordinated care while improving patient outcomes.
“Buy and Build”
Refers to physician management of certain medicines, primarily specialty medicines that require injection or infusion. The physician purchases the drug, manages the inventory, administers the drug, and then submits claims for reimbursement for both the drug and accompanying professional services.
C
“Cadillac” Benefit Plans
A high-cost policy is usually defined by the total cost of premiums, rather than what the insurance plan covers or how much the patient has to pay for a doctor or hospital visit. Though premiums are high, people who have Cadillac plans often have low deductibles and excellent benefits that cover even the most expensive treatments.
Capitation
A provider payment model in which a fixed per-person, per-month (PMPM) fee is paid, typically prospectively, to cover a specified set of services regardless of the number of services provided. Capitation aims to control costs while ensuring comprehensive patient care.
Care Coordination
The deliberate organization and management of patient care activities among multiple health care providers to facilitate appropriate, efficient, and high-quality care. Effective care coordination minimizes duplication of services, prevents medical errors, and ensures patients receive timely and necessary treatments.
Catheter-Associated Urinary Tract Infection (CAUTI)
A type of health care-associated infection that is commonly acquired through a urinary catheter in hospital settings. As prevention is possible, CAUTIs are an indicator of the frequency of medical harm events. See health care-Associated Infection.
Center for Medicare and Medicaid Innovation
A division of the Centers for Medicare and Medicaid Services (CMS), the Center for Medicare and Medicaid Innovation issues grants to support the development and testing of innovative care delivery and payment models.
Centers for Medicare and Medicaid Services (CMS)
The federal agency within the Department of Health and Human Services responsible for providing health coverage to residents through Medicare, Medicaid, the Children’s Health Insurance Program and the federal Marketplace.
Central Line-Associated Bloodstream Infection (CLABSI)
A bloodstream infection acquired through a central line catheter. As prevention is possible, CLABSIs are an indicator of the frequency of medical harm events. See health care-Associated Infection.
Certificate of Need (CON)
A Certificate of Need (CON) is used to restrain health care facility costs and allow coordinated planning of new services and construction. Laws authorizing such programs are one mechanism by which state governments seek to reduce overall health and medical costs. Less common now, many “CON” laws initially were put into effect across the nation as part of the federal “Health Planning Resources Development Act” of 1974.
Certificate of Public Advantage (COPA)
A legal mechanism that allows states to approve mergers that reduce or eliminate competition in return for commitments from the hospital to make public benefit investments and control health care cost growth.
Children’s Health Insurance Program (CHIP)
The Children’s Health Insurance Program (CHIP) is a federal-state partnership that is administered by states according to federal requirements that offers low-cost health coverage to children up to age 19 who are U.S. citizens or eligible immigrants. This program is usually restricted to low-income children in families with incomes too high to qualify for Medicaid.
Choosing Wisely
An initiative led by the ABIM foundation that seeks to advance a national dialogue on avoiding unnecessary medical tests, treatments and procedures. For more, see: http://www.choosingwisely.org
Clayton Act
Allows the FTC and DOJ to challenge anticompetitive mergers and acquisitions, as well as anticompetitive practices. Also gives private parties the right to sue for harm they suffer.
Clinical Nuance
Clinical nuance recognizes that medical services will differ in the amount of health produced for any given patient and that the clinical benefit derived from a medical intervention is dependent on who is using it, who is delivering the service and where it is being delivered. Because of clinical nuance, guidelines on which care is appropriate must be flexible.
Clinical Practice Guideline (CPG)
Standard of care based on current, high-quality evidence that outlines the recommended course of care. Also called Evidence-Based Medicine (EBM)
Clinical Waste
Health care services that provide low or no health benefits over the less costly alternatives, including those that have detrimental health effects (no-value care) or small positive health effects compared to less costly alternatives (low-value care).
Clinically Preventable Burden
The health impact of an intervention, defined as the disease, injury, and premature death that would be prevented if the service were delivered at recommended levels.
Coinsurance
The consumer’s share of the costs of a covered health care service, calculated as a percent (for example, 20%) of the allowed amount for the service.
Common Procedural Technology (CPT)
Billing codes assigned to every task and service a medical practitioner may provide to a patient including medical, surgical and diagnostic services. CPT codes were developed by the AMA. Identical to level 1 HCPCS codes.
Community Based Prevention
Interventions that reach people outside of traditional health care settings (like schools or worksites). These programs encourage health and wellness by educating community members or by introducing changes to the community that promote better health or reduce factors that contribute to health problems.
Community Benefit Obligation
Nonprofit hospitals incur a community benefit obligation in return for their exemption from most federal, state and local taxes. This obligation can be met in a variety of ways but must include “community building activities” which can include social investments.
Community Health Needs Assessment
A systematic, data-driven assessment conducted by state, tribal, local, or territorial health agencies to identify key health needs and issues within a community. Nonprofit hospitals are required to conduct CHNAs every three years, incorporating input from community stakeholders to inform health improvement strategies.
Community Health Worker (CHW)
A trained, frontline public health worker who is a trusted member of, or who has an unusually deep understanding of, the communities in which they work. CHWs serve as a bridge between communities, health care providers, and social services, thereby improving access to care and the quality of services delivered.
Community-Based Organization (CBO)
A nonprofit entity operating at the local level to provide social services such as housing , nutrition assistance, and medico-legal support.
Comparative Effectiveness Research
Systematic research comparing different interventions and strategies to prevent, diagnose, treat and monitor health conditions. The purpose of this research is to inform patients, providers, and decision-makers, responding to their expressed needs, about which interventions are most effective for which patients under specific circumstances.
Competition
Competition offers choice and gives competing organizations incentive to attract consumers, which helps to minimize pricing and encourages entities to prioritize consumer experience. In many markets, health care services and health insurance organizations are notoriously lacking for competition.
Competitive Bidding
Suppliers submit bids to provide certain medical equipment and supplies at a lower price than what Medicare now pays for these items. Medicare uses these bids to set the amount it will pay for those equipment and supplies under the competitive bidding program. Qualified, accredited suppliers with winning bids are chosen as Medicare contract suppliers.
Compounding
Compounding is a practice in which a licensed pharmacist, a licensed physician, or, in the case of an outsourcing facility, a person under the supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a medication tailored to an individual patient’s needs.
Comprehensive Care for Joint Replacement
A model implemented by CMS to bundle payment and quality measurement for an episode of care associated with hip and knee replacements with the goal of encouraging hospitals, physicians, and care providers to work together to improve the quality of care coordination.
Concentration
The number of competitors within a market. The fewer competitors in a market, the higher the concentration level. Frequently measured by the Herfindahl-Hirschman Index (HHI).
Condition-Specific Capitation
A fixed payment to providers for the care that patients may receive for a specific condition or set of conditions (e.g., HIV/AIDS, cancer care, diabetes) in a given time period, such as a month or year. Non-specified conditions may remain reimbursed under fee for service or other payment method.
Consolidated Hospital Market
Hospital systems that wield market power through vertical mergers. In nine out of ten metropolitan areas, the provider market is considered highly concentrated, thereby limiting competition. A common measure of market concentration known as the Herfindahl-Hirschman Index (HHI). A higher HHI value signifies a more highly concentrated market.
Consolidation
When hospitals and other health care entities join together under common ownership through a change of ownership (CHOW), such as a merger or acquisition.
Consumer Assessment of Health Care Providers and Systems (CAHPS)
A series of patient surveys rating health care experiences. The key aspects of CAHPS surveys are: nurse communication, doctor communication, responsiveness of hospital staff, pain management, communication about medicines, discharge information, cleanliness of environment, quietness of environment, overall rating and willingness to recommend.
Consumer Directed Health Plan (CDHP)
These plans typically feature a high deductible, and may be accompanied by a tax advantaged savings account. These accounts are intended to encourage consumers to reduce their use of unnecessary health services in order to build up the balance in the account.
Continuous Eligibility (CE)
Continuous eligibility allows enrollees to maintain their Medicaid or Children’s Health Insurance Program (CHIP) coverage for a full 12 months, regardless of changes in household income. Since 1997, states have had the option to provide continuous eligibility for children enrolled in Medicaid and CHIP. However, starting January 1, 2024, all states are required to offer 12 months of continuous eligibility for children under the age of 19 in both programs. States also have the flexibility to extend continuous eligibility to other populations. For adults, continuous eligibility can be provided through a Section 1115 demonstration project (or waiver).
Coordinated Care Organization (CCO)
Similar to ACO’s, coordinated care organizations are networks of all types of health care providers (physical health care, addictions and mental health care and dental care providers) who work together in their local communities to serve people who receive health care coverage under one payer. Oregon utilizes this model for its Medicaid program, Oregon Health Plan.
Copay
A flat-dollar amount that an insured person pays when accessing a service. A patient might be charged a co-pay when visiting a doctor, filling a prescription, or having an x-ray done.
Copay Accumulator Programs (CAP)
An insurance plan feature where third-party payments, such as payments made by a manufacturer’s patient assistance program, don’t count toward a patient’s deductible or out-of-pocket maximum, resulting in increased out-of-pocket costs and delays in reaching required deductibles.
Cost-Effectiveness
The average net medical cost per quality-adjusted life year gained by offering the service at recommended intervals.
Cost-Sharing
Out-of-pocket expenses that patients must pay under their health plan, including deductibles, co-insurance, and co-payments. Monthly premiums are not considered cost-sharing.
Coverage Gap
In states that did not expand Medicaid many adults, particularly childless adults, fall into a “coverage gap” as a result of earning incomes above Medicaid eligibility limits but below the lower limit to receive Marketplace premium tax credits. This often makes health insurance unaffordable for these individuals.
Coverage Parity
Policies or laws that require insurers to provide a benefit that is comparable or equal to the other benefits offered. For example, requiring insurers to provide the same mental health benefits as it does for general physical health or reimbursing for telehealth visits at the same rate as an in-person visit. These policies improve access to care for needed medical services for all patients, particularly for those who may have difficulty affording the services without coverage or face challenges obtaining in-person care. In addition, it incentivizes providers to participate in an insurer’s network and offer the services that receive parity, as they know they will receive appropriate compensation.
D
Deductible
The amount that a patient must pay for health care services each year before the insurer will begin paying claims under a policy. Deductibles are part of an enrollee’s cost-sharing. Certain services, such as preventive care, may be exempt from the deductible.
Deductible Leveraging
When an insurer’s payment to a provider increases but the policy deductible does not increase, the insurer’s costs go up by a greater percentage than indicated by the provider’s payment increase.
Defensive Medicine
Defensive medicine occurs when doctors order tests, procedures, or visits, or avoid high-risk patients or procedures, primarily (but not always solely) to reduce their exposure to malpractice liability.
Delivery System Reform Incentive Payment (DSRIP)
A Medicaid Section 1115 Waiver-based initiative that provides incentive payments to hospitals and other providers for implementing delivery system transformation efforts. DSRIP programs focus on infrastructure development, care innovation, and improved health outcomes for Medicaid enrollees and uninsured populations.
Department of Justice (DOJ)
One of two federal antitrust enforcement agencies. The Department of Justice (DOJ) is tasked with reviewing proposed health insurance plan consolidations.
Diagnostic Errors
Failures in the diagnostic process, including errors in interpretation, delays in diagnosis, failure to employ appropriate tests, reliance on outdated methods, or neglecting to act on test results, which may lead to adverse patient outcomes.
Direct-to-Consumer Advertising
Any unsolicited promotional endeavor by a pharmaceutical company or other provider of medical services presenting information about medicine or medical services to the public through the popular media. It includes television and radio advertisements, newspaper and magazine advertisements, billboards, and direct mailings. Another class of materials that is sometimes considered to be direct-to-consumer advertising is the brochures that drug companies supply for physicians to give to patients. Although these brochures are provided to patients “indirectly” through physicians, they may have a marketing component and sometimes make claims about drug benefits and risks.
Divestiture
A potential remedy to cure or alleviate the anticompetitive effects of a merger. Divestiture requires spinoff of operations, policyholders, patients, or other business assets to preserve competition.
Drug Patent
A patent is a property right issued by the United States Patent and Trademark Office (USPTO) to an inventor “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States” for a limited time, in exchange for public disclosure of the invention when the patent is granted.
Durable Medical Equipment (DME)
Equipment that is primarily and customarily used for medical purposes and which can withstand repeated use (canes, pumps, etc). A subset of medical devices.
Durable Medical Equipment, Prosthetic Devices, Orthotics, and Supplies
Devices that provide therapeutic benefits to a patient because of certain medical conditions and/or illness, function as an artificial body part, or are used to support, align, prevent or correct the function of movable parts of the body.
E
Effective Rate Review
Beginning in 2011, states are classified based on either having effective rate review programs or not. A state with an effective rate review program must conduct reviews of proposed rate increases at or above the applicable threshold (currently 15%), but if a state lacks the resources or authority to conduct the required reviews, CMS will review the rates for compliance.
“Efficiencies”
A common argument made in support of a proposed consolidation. Examples in health care include streamlined administrative functions, clinical integration, advanced technology acquisition, economies of scale, and synergies resulting from bringing talents together. To be relevant, efficiencies must result in genuine benefits to consumers, such as lower prices, higher quality care, or better health outcomes—not just savings to the combined entity.
Electronic Consultation
A form of telehealth, electronic consultation refers to two-way communications between local primary care physicians and specialists, creating virtual communities for providers to share expertise and acquire new skills.
Employee Retirement Income Security Act (ERISA)
A 1974 federal law that sets minimum standards for most retirement and health plans in private industry in order to provide uniform, federal regulation of these plans. The upshot of ERISA is that states cannot regulate health plans where the employer is the ultimate insurer (self-funded plans) but can regulate health plans that are full funded.
Enrollment Churn
When individuals move between different coverage sources or between having coverage and being uninsured, often due to changes in eligibility but occasionally due to administrative error or policy change.
Episode-Based Payment
A fixed payment to providers for a clinically defined episode (such as a knee replacements) that may involve several practitioner types, care settings, and services or procedures over time. See also Bundled Payment.
Essential Health Benefits (EHB)
A package of ten benefits including hospitalization, outpatient services, maternity care, prescription drugs, emergency care and preventive services. The health law requires that all health insurance plans sold to individuals and small businesses after March 2010 include Essential Health Benefits.
Exchange
Another term for the health insurance Marketplace established under the Affordable Care Act.
Exclusivity (Prescription Drugs)
Exclusivity is exclusive marketing rights granted by the FDA upon approval of a drug and can run concurrently with a patent or not. It prevents the submission or effective approval of ANDAs or applications. There are three types of exclusivity (5-year, 3- year, and 180-day).
F
Facility Fees
Facility fees are extra charges that hospitals may bill patients after outpatient services, on top of professional service costs, to cover operational expenses. As hospitals acquire more outpatient practices, these fees are increasingly applied, raising patient costs and disproportionately affecting communities already facing financial challenges.
FDA’s MedWatch
This program has responsibility to oversee the safety and effectiveness of prescription drugs. This reporting system is also the place to report medical device-related adverse events and problems.
Federal Poverty Level (FPL)
A federally defined measure of income used to determine eligibility for public assistance programs, including Medicaid, ACA Marketplace subsidies, and other social services. FPL thresholds are updated annually and vary based on household size.
Federal Trade Commission (FTC)
One of two federal antitrust enforcement agencies. The Federal Trade Commission (FTC) is tasked with reviewing proposed health provider consolidations.
Fee-for-Service (FFS)
A payment model in which providers are reimbursed for each individual service rendered without regard to quality, outcomes, or efficiency. This traditional payment structure may contribute to higher health care costs by incentivizing service volume over value.
Fee-for-Value
Incentive payments added to fee-for-service reimbursement, paid when quality targets are met. See Pay for Performance.
“File and Use”
A regulatory approach that permits an insurer to file rate increases before or on the effective date, and implement them without having received state approval first. But, state regulators may conduct a retrospective review and take corrective action if rates are found to be excessive or not in compliance with state laws and regulations.
Flexible Spending Account (FSA)
A benefit that may be offered by an employer, allowing employees to put money aside on a pre-tax basis for health and/or dependent care expenses in the coming year. Generally, the FSA will be funded from the employee’s own income, although employers may opt to contribute. Employees choose how much to contribute, up to a maximum of $2,500 per year. Contributed funds not used for eligible expenses during the year are forfeited.
Food and Drug Administration (FDA)
The federal agency, part of the Department of Health and Human Services, that regulates pharmaceutical drugs, food, tobacco products and medical devices. The agency is responsible for protecting and promoting public health.
Food Desert
A low-income area with poor access (measured by distance to the nearest supermarket) to healthy and affordable food.
Food Insecurity
A lack of consistent access to the food required for an active, healthy life due to a lack of financial or other resources.
Form A
When required by state law, a Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer filed with their state insurance commissioner(s) to assist regulators in anticipating the market impact of the proposed merger or acquisition and preparing for a public hearing on the matter.
Form E
When required by state law, a pre-acquisition notification that domestic insurance carriers file with their state insurance commissioner(s) to assist regulators in anticipating the market impact of the proposed merger or acquisition.
Formulary
The list of prescription drugs covered fully or in part by a health plan. Formularies often include both brand name and generic drugs, and are used to manage drug costs. Under the ACA, health plans must include choices within commonly prescribed drug categories and classes in their formularies.
Fraud and Abuse
Fraud and abuse take on many forms, but generally include intentional misrepresentation for the purpose of receiving greater reimbursement from a public or private payer. There is no precise measure or definition of health care fraud and abuse.
From Conception to End of Pregnancy (FCEP) Option
FCEP Formerly the CHIP Unborn Child Option, this program extends CHIP to low-income pregnant women, regardless of immigration status, to improve birth outcomes. Coverage may be limited to prenatal care or states may provide comprehensive benefits similar in scope to pregnancy related Medicaid.
Fully Funded Plan
A health insurance coverage option where the health plan bears the risk for covering the claims of the enrolled population. These plans are regulated by state regulators and typically are purchased by individuals and small employers.
G
Gag Clause
A provision that may be incorporated in a physician’s contract with managed care organizations, which prevents the physician from being open with his or her patients about the terms of the patient’s coverage and therapeutic options.
General Controls
The basic provisions that allow the FDA to monitor and regulate certain classes of devices. They include provisions that relate to adulteration; misbranding; device registration and listing; premarket notification; banned devices; notification, including repair, replacement, or refund; records and reports; restricted devices; and good manufacturing practices.
Generic Drugs
Generic drugs are copies of brand-name drugs that have exactly the same dosage, intended use, effects, side effects, route of administration, risks, safety, and strength as the original drug.
Generic Drug User Fee Amendments (GDUFA)
Legislation that allows FDA to collect fees to pay for the approval process for generic drugs.
Generic Pathway
An approval pathway for generic versions of biologic drugs, or biosimilars. The ACA created this new pathway but ensured that brand name biologic manufacturers are protected from this new competition for at least 12 years.
Global Budgets
A payment model that sets a predetermined budget or expenditure target for health care delivered during a predetermined period of time. A global budget is typically applied to hospital budgets, but may be used to minimize expenditures at the national or state level or applied to specific services. Providers are responsible for expenditures in excess of the set amount, creating an incentive to reduce unnecessary utilization and invest in prevention. More detailed definitions vary depending on the types of services covered and the systems to which the budgets are applied. Global budgets aim to control health care expenditures, reduce unnecessary utilization, and promote preventive care investments.
H
Hatch-Waxman Act
A 1984 federal law that established a process for how generic drugs are approved by the FDA and manufactured by pharmaceutical industry. Also known as the Drug Price Competition and Patent Term Restoration Act.
Health Care Common Procedure Coding System (HCPCS)
A standardized code system used to report hospital services and physician services that participate in the OPPS, for reimbursement by CMS to providers for outpatient services. Level 1 HCPCS codes are identical to CPT. Level 2 HCPCS codes are designed to represent non-physician services (e.g. ambulance rides, wheelchairs or durable medical equipment).
Health Disparity
Preventable differences in the burden of disease, injury, violence or opportunities to achieve optimal health that are closely linked with social, economic and/or environmental disadvantage. Populations that disproportionately experience health disparities can be defined by factors such as race or ethnicity, gender, socioeconomic status, religion, disability, geographic location, sexual orientation or gender identity.
Health Enterprise Zone
A program established by the state of Maryland in which geographic areas with measurable and documented economic disadvantage and poor health outcomes received targeted state resources, such as income tax credits, loan assistance repayment and grant funding, to reduce health disparities, improve health outcomes and reduce health costs and hospital admissions and readmissions in those zones. Similar to health equity zone and promise zone.
Health Impact Assessment
A process that evaluates the potential health effects of a proposed policy, project or program on a population, particularly disadvantaged groups. The process includes screening, scoping, appraisal, recommendations, reporting and monitoring. Recommendations aim to maximize the proposal’s positive health effects and minimize its negative health effects.
Health Improvement Plan
A long-term, systematic effort based on community health assessments or feedback from community stakeholders to establish and maintain policies to address health problems in a community. Sometimes referred to as a Community Health Improvement Plan (CHIP).
Health in All Policies
A collaborative approach that integrates and articulates health considerations into policymaking across sectors to improve the health of all communities and people.
Health Indicators
A measurable characteristic designed to summarize information about a given topic in population health or health system performance.
Health Insurance Marketplace
The Health Insurance Marketplaces created by the Affordable Care Act help individuals and small businesses find qualified insurers to provide coverage. Marketplaces also help individuals learn if they qualify for help paying for health insurance. People can also apply for Medicaid through the marketplace.
Health Information Technology (HIT)
Health Information Technology, such as electronic health records and e-prescribing, are designed to increase provider and health system efficiency, lower costs and improve patient care coordination.
Health Maintenance Organization (HMO)
A type of health insurance plan that requires members to receive care from a designated network of providers, hospitals, and specialists. HMOs emphasize preventive care and cost control but generally do not cover out-of-network services except in emergencies.
Health Professional Shortage Areas (HPSA)
A geographic area, population or facility with a shortage of primary care, dental or mental health providers and services.
Health Reimbursement Arrangement (HRA)
An HRA is a tax advantaged account that may be used to pay premiums or unreimbursed medical expenses. An HRA must be funded by an employer—it cannot be funded from the employee’s salary. An HRA may be offered with other health plans, including FSAs.
Health Savings Account (HSA)
A way of saving for medical bills available to taxpayers enrolled in a qualified high-deductible health plan. The funds contributed to the account are not subject to federal income tax at the time of deposit. Funds roll over and accumulate year to year, if not spent.
Health Spending Benchmarks
Annual targets for health care spending that can be established at a state level or for other subsets of spending. These targets are used to both measure and constrain aggregate health care spending.
Health Spending Oversight Entity
An agency that keeps track of health care spending in a comprehensive and systematic way, provides data and research support to the state and other stakeholders to track health care prices and quality to determine if resources are used efficiently.
Health Spending Target
Annual targets for health care spending that can be established at a national level, a state level or for other subsets of spending. These targets are used to both measure and constrain aggregate health care spending.
Hospital or Health Caare Acquired Infections (HAI)
Infections that develop in patients during hospital stays or medical treatment and are unrelated to the original reason for seeking care. HAIs, such as catheter-associated urinary tract infections and central line-associated bloodstream infections, pose significant patient safety concerns.
Herfindahl- Hirschman Index
A measure used by the DOJ and FTC to measure market concentration. It is calculated by summing the square of the market share of each entity competing in that market. (For example, a market with 100 entities competing, each having an equal market share of1%, would have an HHI of 100; a market with one entity having a monopoly share of 100 percent would have an HHI of10,000.) A market with an HHI under 1500 is considered non-concentrated (competitive); with a score between 1500 and 2500, moderately concentrated (less competitive); with a score above 2,500, highly concentrated (not competitive).
High Deductible Health Plan (HDHP)
A type of health insurance plan that, compared to traditional health insurance plans, has higher deductibles although premiums may be lower. These plans are often a component of Consumer Directed Health Plan approaches.
High Value Health Care System
A patient centered health care system where all incentives are aligned to create an environment where providers can give the best care possible by using resources efficiently to optimize patient care.
High Value Care
Health care services that provide substantial clinical benefit with minimal risks or trade-offs, ensuring patients receive treatments that are both effective and necessary.
Horizontal Consolidation
When two or more entities providing similar services merge, e.g., two hospitals.
Hospital Acquired Conditions (HACs)
A condition which occurs in the hospital, causes injury to patients and could reasonably have been prevented through the application of evidence-based guidelines. HACs include health care-associated infections, adverse drug events and injuries or falls that occur in hospitals, among others. HACs are defined by the Centers for Medicare & Medicaid Services (CMS) and is used by public and private payers in hospital reimbursement. Also known as health care-associated condition.
Hospital Chargemaster (Charge Description Master) (CDM)
A hospital charge description master contains the prices of all services, goods, and procedures for which a separate charge exists. It is used to generate a patient’s bill. But relatively few patients pay this amount. Insurers negotiate discounts from these charge master rates.
Hospital Inpatient Quality Reporting Program (Hospital IQR)
A pay for quality reporting program which requires hospitals to submit data on quality of care provided in inpatient settings or receive a 2% reduction in their annual payment update.
Hospital Margin
The difference between total net revenue and total expenses divided by total net revenue; also known as the payment-to-cost ratio.
Hospital Outpatient Quality Reporting System (Hospital OQR)
A pay for quality reporting program which requires hospitals to submit data on quality of care provided in outpatient settings or receive a 2% reduction in their annual payment update.
Hospital Rate Setting
A regulatory mechanism that establishes limits on hospital reimbursement rates, either through formula-based pricing, individual hospital budget reviews, or a combination of the two approaches.
I
Iatrogenic Harm
Refers to when a patient acquires a new illness or is injured by services provided by medical provider. See Medical Harm.
Immigrant Five-Year Bar
Federal regulations prohibit certain lawfully residing immigrants from receiving Medicaid and CHIP without waiting five years. States have the option to cover lawfully residing children under age 21 and/or pregnant women with an exemption from the five-year bar.
Implantable Medical Devices
Devices that are inserted into the human body to replace a missing body part, support a damaged body part, or modify an important body function.
Implicit Bias
The beliefs and assumptions that affect our understanding, actions and decisions in an unconscious manner. They can be both favorable and unfavorable assessments and are activated involuntarily, without an individual’s awareness or intentional control.
In-Network Provider
Hospitals, pharmacies and doctors who have contracted with the health plan. These hospitals and doctors agree to the plan’s rules and fee schedules and agree not to charge or “balance bill” patients for amounts beyond the agreed upon fee.
In-Network
If you use the services of hospitals and doctors who have contracted with the health plan, this is called going in-network. When you use in-network providers, you won’t face extra costs over and above the cost-sharing specified in your policy.
Independent Payment Advisory Board
The Independent Payment Advisory Board (IPAB) is a new executive-branch entity created by the Affordable Care Act. It consists of a 15 member board of medical providers, health care experts, and consumers who will serve paid six year terms. Starting in 2015, IPAB will make “binding recommendations” to decrease Medicare spending if per beneficiary growth in spending exceeds target growth rates. The recommendations will be sent to Congress, which must agree to them or pass alternative cuts of the same size within the year. Alternately, a supermajority in the Senate can amend IPAB’s proposed cuts. Proponents say that the board is a vital mechanism for controlling Medicare spending, since Congress and the executive branch have historically been unwilling or unable to do so. Opponents argue that the law cedes too much authority to an appointed panel and budget cuts might lead to reductions in the quantity or quality of health care services. The ACA limits what the board can do: “The proposal shall not … ration health care, raise revenues or Medicare beneficiary premiums … increase Medicare beneficiary cost-sharing …, or otherwise restrict benefits or modify eligibility criteria.”
Inpatient Prospective Payment System (IPPS)
A payment system created to reimburse acute care hospital inpatient stays under Medicare Part A (Hospital Insurance), based on prospectively-set rates. Under the IPPS, each case is categorized into a diagnosis-related group (DRG). Each DRG has a payment weight assigned to it, based on the average resources used to treat Medicare patients in that DRG.
Insurance
In exchange for a fixed premium, health insurance helps you pay for medicine, visits to the doctor or emergency room, hospital stays and other medical expenses. Because it can protect you from large, unexpected expenses, health insurance can provide you with significant financial protection and access to services that may otherwise be unaffordable.
Insurance Commissioner
State official that regulates insurance industry activity. These agencies work in tandem with the DOJ, FTC and the state attorney general regarding antitrust concerns, as there is often a parallel “pubic interest” review available under state law.
Intersectionality
Coined by Kimberlé Williams Crenshaw, this term refers to the different social categories that interact and overlap to create different forms of challenges people face accessing resources, such as health care. This framework challenges the notion that exclusion is unidirectional or uniform.
Interstate Medical Licensure Compact
A legal agreement among states that allows eligible physicians to provide telemedicine services across state lines.
Interstate Nurse Licensure Compact (NLC)
A legal agreement among states that allows eligible nurses to provide telemedicine services across state lines.
Interstate Physical Therapy Compact
A legal agreement among states that allows eligible physical therapists to provide telemedicine services across state lines.
Investigational New Drug Application (IND)
An IND is a request for authorization from the Food and Drug Administration (FDA) to administer an investigational drug or biological product to humans.
L
List Price for Prescription Drugs
The price of a drug that is shown in a pharmacist’s computer.
Low Value Care
Medical services that provide little or no clinical benefit and may contribute to unnecessary health care spending. Some low-value services may even expose patients to potential harm.
M
Mandated Benefits
A health service or category of health service provider that a carrier is required by its licensing or other statute to include in its health plan.
Market
A market has both a geographic dimension and a product or service dimension. For example, the geographic dimension for a hospital market might be a Hospital Referral Region (HRR). For a health insurance market, the product or service dimension in any geographic market area might be individual, small group, large group, or Administrative Services Only (ASO).
Market Power
The ability of a firm to defy competitive market forces within a market and raise prices profitably without worrying about being undercut by competitors.
Maximum Allowable Cost
The upper limit or maximum amount that a plan will pay for generic and brand-name drugs that have generic versions available (multi-source brands)
McCarren-Ferguson Act
A 1945 federal law that allows state insurance law to preempt federal law and exempts the business of insurance from the federal antitrust laws where there is state regulation. This limits the ability of federal antitrust enforcers to challenge the anticompetitive insurer practices.
Medicaid
A joint federal-state program providing free or low-cost health coverage to low-income individuals and families. Medicaid covers hospital stays, physician services, prescription drugs, and more. While the Affordable Care Act (ACA) allows states to opt in to expanded Medicaid eligibility beyond 100% FPL, not all states have adopted the expansion.
Medicaid Best Price
The lowest manufacturer price paid for a prescription drug, regardless of package size, by any purchaser. The Medicaid best price is reported to CMS and states, but is otherwise confidential. Included in best price are cash discounts, free goods that are contingent upon purchase, volume discounts and rebates. Excluded from best price are prices paid by the federal government.
Medicaid Expansion
When states increase Medicaid eligibility to allow all adults with incomes at or below 138% FPL to enroll in Medicaid. Prior to the ACA, Medicaid coverage was limited to low-income adults with dependents, qualified pregnant women and children and individuals receiving Supplemental Security Income (SSI).
Medicaid for Justice Involved People
A justice-involved individual is a person who is currently or formerly incarcerated in a correctional facility. States have historically been unable to provide Medicaid coverage to individuals when they are incarcerated (known as the “inmate exclusion”). However, CMS recently issued guidance allowing states to provide Medicaid services to justice-involved individuals while they are in a correctional setting to support their reentry into the community under a 1115 demonstration waiver.
Medicaid Presumptive Eligibility
States can authorize certain entities, such as hospitals, community health centers and schools, to temporarily extend Medicaid or Children’s Health Insurance Program (CHIP) coverage to certain individuals until a full eligibility determination can be made. This process enables people who are not currently receiving Medicaid coverage, but appear to be eligible based on basic demographic information, to have immediate access to coverage and care.
Medicaid Waivers
Waivers come in different forms. Under a Medicaid 1115 waiver, a state can waive certain Medicaid program requirements, allowing the state to provide care for new populations or to use new care approaches. Under a 1915 waiver, a state can change how they provide care to beneficiaries using long-term services and supports or home and community-based services.
Medical Error
An act of commission (performing an incorrect action) or omission (failing to take a necessary action) that results in an undesirable patient outcome or increases the risk of harm. Medical errors include misdiagnoses, medication mistakes, and procedural complications.
Medical Harm
Unintended physical injury caused by medical care, requiring additional treatment, monitoring, or hospitalization. Medical harm encompasses errors, hospital-acquired infections, and adverse drug events.
Medical Harm Reporting
The disclosure of patient safety events by the clinical personnel associated with the event.
Medical Home
A patient-centered model of primary care that fosters a continuous, coordinated partnership between patients, families, and primary care providers, with support from specialists and community resources. Originally introduced by the American Academy of Pediatrics in 1967, the medical home model emphasizes comprehensive care, care coordination, and enhanced patient-provider relationships. It is often associated with alternative reimbursement structures that incentivize collaboration and improved health outcomes.
Medical Loss Ratio (MLR)
Medical Loss Ratio (MLR) measures the proportion of premium revenues spent on clinical services and quality improvement. The ACA requires insurers to issue rebates to enrollees if this percentage does not meet minimum standards of 85% (large group plans) or 80% (nongroup and small group plans) of premium dollars on medical care.
Medical Malpractice
Medical malpractice occurs when a health care provider’s negligence or incompetence results in patient harm. Medical malpractice lawsuits are a relatively common occurrence in the United States. The injured patient must show that the physician acted negligently in rendering care, and that such negligence resulted in injury. Money damages, if awarded, typically take into account both actual economic loss and noneconomic loss, such as pain and suffering.
Medical Technology
Applications of knowledge to practical medical problems but often encompassing medical drugs and devices, and health information technology (HIT).
Medical Tourism
Organized travel to a foreign country for the enhancement or restoration of the individual’s health through medical intervention.
Medical Trend
The rate at which claims are expected to increase for the future rating period. Its two most important elements are (1) unit cost trend (price inflation) and (2) utilization and mix of services. Sometimes identified in rate filings as the “claims trend,” “trend factor,” “rent assumption” or “loss trend.”
Medically Underserved Area (MUA)
A geographic region identified as having a shortage of primary care services, typically characterized by a low provider-to-population ratio, high infant mortality, elevated poverty rates, or a high proportion of elderly residents. MUAs are designated by the Health Resources and Services Administration (HRSA) based on specific criteria.
Medically Underserved Population (MUP)
A specific subgroup of individuals within a Medically Underserved Area who experience additional barriers to accessing health care, such as economic, cultural, or linguistic challenges. Examples include individuals who are homeless, low-income, Medicaid-eligible, Native American, or migrant farmworkers.
Medicare
Medicare is a federally financed and administered insurance program for seniors 65 and older and younger people with disabilities, as well as people with end stage renal disease, Amyotrophic Lateral Sclerosis (“Lou Gehrig’s Disease”), and, in some cases, Multiple Sclerosis. Almost all Americans over age 65 receive coverage through Medicare.
Medicare Advantage (Medicare Part C)
An alternative to traditional Medicare that lets beneficiaries choose to receive their Medicare benefits through a private insurance company. Plans contract with the federal government and are required to offer at least the same benefits as traditional Medicare, but may follow different rules and may offer additional benefits, including lower cost-sharing. Unlike traditional Medicare, enrollees may be restricted to only certain “in-network” providers, or may be required to pay higher costs if they choose an out-of-network provider.
Medicare Part D
The prescription drug benefit provided under the Medicare program. Medicare Payment Advisory Commission MedPAC An independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The Commission’s statutory mandate is quite broad: In addition to advising the Congress on payments to private health plans participating in Medicare and providers in Medicare’s traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare.
Medicare Payment Advisory Commission (MedPAC)
MedPAC is an independent congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program.
Medicare Supplement (Medigap) Insurance
Optional, private insurance policies that can be purchased to “fill-in” Medicare’s coverage gaps, like deductibles and co-insurance not covered by traditional Medicare (Part A and Part B). Some people obtain Medicare supplements through an employer, while others buy these policies independently. Individually purchased policies must conform to one of the federally mandated benefit designs.
Medication Errors
A medication error is any preventable event that may cause or lead to inappropriate medication use or patient harm while the medication is in the control of the health care professional, patient, or consumer. Any preventable event that may cause or lead to inappropriate medication use or patient harm while the medication is in the control of the health care professional, patient or consumer.
Methicillin-Resistant Staphylococcus Aureus (MRSA)
The cause of a staph infection that is resistant to some antibiotics. The spread of MRSA in health care settings can be prevented through certain protocols; therefore, it is used as an indicator of the frequency of medical harm events.
Monopoly
A company or group having exclusive control over a commercial activity.
Most Favored Nation Clause (MFN)
An agreement between a buyer and a seller that guarantees the buyer the lowest price for a product or service during the contract period. In the health care industry, a payer, such as an insurer, may incorporate a MFN clause in its agreement with a hospital or provider. These provisions may allow insurers and providers to collude to raise prices.
N
National Association Of Insurance Commissioners (NAIC)
A private organization of the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories that establishes standards and best practices, conducts peer review, and coordinates their regulatory oversight.
National Evaluation System for Health Technology (NEST)
An FDA system under development to more efficiently generate evidence for medical device evaluation and regulatory decision. The National Evaluation System for Health Technology (NEST) will leverage real-world evidence and tailored analytics across the product life-cycles of medical devices.2
National Health Care Safety Network (NHSN)
The Centers for Disease Control’s (CDC) tracking system for health care-associated infections that provides health care facilities and state and federal governments with data that can be used to identify problems and measure prevention efforts. See health care-Associated Infections.
National Health Service Corps
A federal program that offers scholarships and loan repayment for primary care professionals—including physicians, dentists, nurse practitioners and physician assistants—to practice in underserved regions.
National Quality Forum (NQF)
A not-for-profit, membership-based organization that sets national priorities and goals for performance improvement and convenes experts to endorse national consensus standards.
Negotiated Rate
The contracted payment amount that a health care provider agrees to accept from an insurance company for a specific medical service. Negotiated rates apply to in-network providers and are established through agreements between the provider and insurer to determine reimbursement levels for covered services.
Network Adequacy
A health plan provider network’s ability to deliver adequate care to patients. This involves delivering the right care to a patient at the right time, without having to travel unreasonably far to access providers in their network.
Network Provider
A doctor or hospital who has a contract with a given health insurance company. These hospitals and doctors agree to the plan’s rules and fee schedules and agree not to charge or “balance bill” patients for amounts beyond the agreed upon fee.
Never Events
A category of preventable medical errors that should never occur in a health care setting, such as wrong-site surgeries, patient deaths due to medication errors, or hospital-acquired infections. Compiled by the National Quality Forum (NQF) this list includes 28 occurrences that are defined as “adverse events that are serious, largely preventable, and of concern to both the public and health care providers for the purpose of public accountability.” Medicare, many state Medicaid programs and private insurers have adopted policies to no longer pay for additional costs associated with these preventable errors.
New Drug Application
It is an application in the United States through which drug sponsors formally propose that the FDA approve a new pharmaceutical for sale and marketing.
No Surprises Act (NSA)
Federal legislation that protects people covered under group and individual health plans from receiving surprise medical bills when they receive most emergency services, non-emergency services from out-of-network providers at in-network facilities and services from out-of-network air ambulance service providers effective January 2022.
Non-Compete Clauses
Contact provisions that prohibit employees, including physicians, from working at competing health care facilities within a certain distance and/or for a certain period of time following the end of their employment.
O
Operational Waste
A form of health care waste representing four types of inefficient and unnecessary uses of resources: duplication of services, inefficient processes, overly expensive services, and errors.
Orphan Drug
A pharmaceutical agent that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease.
Orphan Drug Exclusivity
Granted to drugs designated and approved to treat diseases or conditions affecting fewer than 200,000 in the U.S. (or more than 200,000 and no hope of recovering costs).
Other Administrative Activities (Non-BIR Activities)
Non-BIR administrative activities incurred by health care stakeholders, including: enrollment, eligibility, underwriting, communications, customer services, marketing, quality assurance, legal compliance and filing services, licensing, admitting, insurance coverage and selection, and navigation of provider networks.
Out-of-Network (OON) Provider
Doctors, pharmacies, hospitals, and other health care providers who have not contracted with a given health plan are “out-of-network.” This means that the insurance company has not negotiated rates with them, and may limit coverage of services by these providers. Using out-of-network providers often results in higher out-of-pocket costs for patients.
Out-of-Pocket Costs (OOP)
Costs that consumers are responsible for and are not covered by insurance. Can include co-payment, coinsurance, and deductibles.
Out-of-Pocket Limit
Annual limits on cost-sharing that patients have to pay under a health insurance plan. This limit does not apply to premiums, balance-billed charges from out-of-network health care providers or services that are not covered by the plan.
Outpatient Prospective Payment System (OPPS)
Pays hospitals based on predetermined rates per service or ambulatory payment classifications (APCs). APCs are associated with one or more health care Common Procedure Coding System codes (HCPCS codes) which are updated annually.
P
Participatory Budgeting
A democratic process in which community members decide how to spend part of a public budget.
Patent Thicket
Patent system abuse caused by drug companies using multiple patents to extend their monopolies.
Patient Activation
Patient activation refers to a person’s ability to manage their health and health care. Engaging or activating consumers has become a priority for employers, health plans and policymakers. Higher activation levels are associated with lower levels of unmet need for medical care.
Patient Experience Measures
The full range of patient interaction with the health care system from scheduling to interactions with providers. Often measured through CAHPS.
Patient Reported Outcome
Any report of the status of a patient’s health condition that comes directly from the patient, without interpretation of the patient’s response by a clinician or anyone else.
Patient Reported Outcomes Measurement Information Systems (PROMIS)
A patient reported outcomes measurement tool that uses information technology, psycho metrics, and qualitative, cognitive and health survey data of patient reported outcomes that have major impact on quality of life.
Patient Safety and Quality Improvement Act (PSQIA)
Enacted by Congress in 2005, PSQIA encourages provider-driven activities that include collecting, analyzing and reporting patient safety data to reduce medical harm events.
Patient Safety Indicators (PSI)
A set of 26 standardized measures developed by the U.S. Agency for Healthcare Research and Quality (AHRQ) to assess the occurrence of safety-related adverse events in hospitals. PSIs help identify complications arising from surgical procedures, childbirth, and other hospital-based treatments to improve patient safety and healthcare quality.
Patient Safety Organization (PSO)
An entity to which health care providers and facilities report patient safety data. PSOs can create patient safety recommendations and enforce or encourage these standards. PSO patient safety data can be confidential or publicly-accessible.
Patient-Centered Outcomes Research Institute (PCORI)
The Patient-Centered Outcomes Research Institute (PCORI) is authorized by Congress to conduct research to provide information about the best available evidence to help patients and their health care providers make more informed decisions. PCORI’s research is intended to give patients a better understanding of the prevention, treatment and care options available, and the science that supports those options.
“Pay for Delay”
Brand-name pharmaceutical companies can delay generic competition that lowers prices by agreeing to pay a generic competitor to hold its competing product off the market for a certain period of time.
Pay for Performance (P4P)
A reimbursement model in which health care providers receive financial incentives based on their performance in meeting predetermined quality and efficiency benchmarks. P4P programs reward or penalize providers based on specific cost, quality, and patient outcome measures to encourage improved care delivery.
Pay for Success (PFS)
The pay for success (PFS) model creates a public-private partnership whereby the private partner makes an initial investment in a program that addresses a social problem. The government partner then repays the investor based on improvements to predefined outcome or performance measures.
Payers
Health care costs are paid for by private or public payers. Private payers are insurance companies and public payers are federal or state governments, but ultimately these costs are paid for by consumers through their premium payments, lost wages and taxes.
Payment-to-Cost Ratio
The ratio of total payments to total charges.
Pharmacy Benefit Managers (PBM)
Companies that negotiate rebates and manage drug benefits for health plans, businesses and government programs.
Physician Quality Reporting System (PQRS)
Voluntary quality reporting program in which eligible professionals and group practices report quality of care information to Medicare.
Pipeline Program
Programs to provide educational and career support to students to strengthen the health care workforce.
Population Health
An approach to health that focuses on the outcomes of a defined group of individuals, including the overall distribution of health statuses within that group. Population health considers the influence of social, economic, and environmental factors on health outcomes.
Potentially Avoidable Complication (PAC)
A medical event that negatively impacts a patient and is deemed preventable with appropriate care management. PACs include hospital-acquired conditions, patient safety indicators, avoidable readmissions, healthcare-associated infections, and medication errors. As defined by Altarum, PACs include hospital-acquired conditions, patient safety indicators identified by the U.S. Agency for health care Research and Quality (AHRQ), avoidable readmissions, health care-acquired infections, medication errors and more, to the extent that this type of harm can be identified by claims data.
Preauthorization
Approval given by an insurer for a service before it is provided. This is sometimes known as prior approval or precertification. The need to obtain preauthorization varies from plan to plan, and not all services or health plans require it.
Preference-Sensitive Care
Refers to medical conditions that have more than one legitimate treatment option—each option having different tradeoffs for patients. This category of care is the subject of many interventions designed to help patients assess risks and benefits of treatment options to make informed decisions based on personal values and preferences. See also Supply Sensitive Care.
Preferred Provider Organization (PPO)
A type of health insurance plan that offers a network of contracted health care providers, allowing enrollees to receive services at discounted rates. PPOs typically allow members to seek care from out-of-network providers at a higher cost, offering greater flexibility compared to Health Maintenance Organizations (HMOs).
Preferred Provider
A doctor or hospital with a contract with your health insurance company. Preferred providers are often described as “in-network.” These hospitals and doctors agree to the plan’s rules and fee schedules and agree not to charge or “balance bill” patients for amounts beyond the agreed upon fee.
Preferred Provider Organization (PPO)
A type of health plan that provides healthcare coverage through a network of providers. Typically the PPO requires you to pay higher costs if you seek care from out-of-network providers.
Premarket Approval
The FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices before they come to market.
Prescription Drug Affordability Board (PDAB)
A prescription drug affordability board is a state-level entity tasked with evaluating the prices of high-cost medications to ensure they are affordable and accessible. These boards often have the authority to review price increases, set upper payment limits, and recommend strategies to contain drug costs while maintaining patient access to necessary treatments.
Prescription Drug Rebate
An incentive payment made by a drug manufacturer, to a drug wholesaler or other payer such as a PBM based on how much the entity increases the market share or actual “sales” of a drug.
Prescription Drug User Fee Act (PDUFA)
Enacted in 1992, the Prescription Drug User Fee Act (PDUFA) is a law that allows the FDA to collect fees from drug manufacturers in order to fund new and expedited drug approval processes. PDUFA is reauthorized every five years.
Preventive Services
Services that are intended to prevent disease or to identify disease while it is easily treatable. Under the ACA, insurers are required to provide coverage for certain preventive benefits without deductibles, co-payments or other cost-sharing, unless grandfathered.
Price Caps
Caps limit the amount of money health care providers, insurers or others can charge for a particular product or service. Can be used as a strategy to control prices in highly consolidated markets.
Price Gouging
When a seller spikes the prices of goods or services to a level much higher than is considered reasonable or fair, especially during a state of emergency.
Price Transparency Tool
A website that displays price information on health care services, allowing consumers to “shop” for the best price and budget for expected services.
Primary Care Physician (PCP)
A general or family practitioner who is your personal physician and often first contact within the health care system. The PCP will usually direct the course of your treatment and refer you to other doctors and/or specialists in the network if specialized care is needed.
Private Health Insurance
Health insurance offered by a private entity instead of the state or federal government.
Product Hopping
A strategy drug makers use to keep brand-name drug prices high by reformulating existing brand therapies in order to delay generic entry. Companies discontinue the old formulation of a drug whose patent expiration date has passed or is approaching in an attempt to force consumers to change to the drug’s new—and newly patented— formulation.
Provider Directory
A directory of in-network providers, generally provided by an insurer, to help enrollees find in-network care.
Provider Reimbursement
Payments to providers such as doctors or hospitals for patient care from insurance companies, Medicare, or Medicaid.
Provision For Adverse Deviation (PFAD)
An insurer may increase a claims projection to account for “uncertainty.” This item may actually be a disguised extra profit margin.
Public Charge Rule
An immigration rule wherein a person is prevented from immigrating to the United States if they are considered likely to become a “public charge,” that is, one who receives a public benefit such as Medicaid, Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), etc., for a period of 12 months during a 36-month period. Changes in the government’s interpretation of “public charge” can affect immigrants’ enrollment in public assistance programs, and thus, their health outcomes.
Public Good
A commodity or service that provides broad benefits to the public and for which it isn’t possible to exclude others from realizing those benefits. For example, investments that reduce infectious disease benefit all, regardless of who made the investments.
Public Health Bundle
Similar to the idea of bundled payments for common health care procedures (for example, knee replacement), the not-yet-tested Public Health Bundle extends the model to partners outside the health care system. A state or local health department establishes a fund to receive annual payments from participating payers based on anticipated health care costs of a certain type. The fund then is responsible for reimbursing payers for the actual care provided. To reduce payouts, the healthd epartment convenes a community coalition of public and private partners to make upstream investments to address the underlying issue.
Public Option
A publicly operated health insurance plan that operates alongside private plans in the marketplace. This coverage is often directed and operated by a state to provide residents a high-value, affordable health insurance option that can be purchased in the individual and small-group market, typically on a state-based exchange.
Public Reporting
The practice of making health care quality and performance data publicly available to inform consumer choices and promote accountability. Public reporting often includes comparative data on hospital and physician performance, patient safety measures, and health care costs. This transparency serves as a non-financial incentive for providers to improve care quality.
Q
Qualified Health Plan (QHP)
A health insurance plan that meets specific federal and state certification requirements to be offered on the Health Insurance Marketplace under the Affordable Care Act (ACA). QHPs must provide essential health benefits, follow established cost-sharing limits, and comply with consumer protection standards.
Quality Adjusted Life Year (QALY)
A metric used to assess the value of medical interventions by incorporating both the quality and quantity of life gained. A QALY of 1.0 represents one year of perfect health, while years lived with illness or disability are assigned lower values based on their impact on overall well-being. This measure is widely used in health economics and cost-effectiveness analyses.
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Rate Filing
Submitted by an insurer to state DOI or HHS, the rate filing contains the information justifying, or purporting to justify, the rates the insurer seeks to charge.
Rate Review
The regulatory process through which state or federal authorities evaluate proposed health insurance premium increases to ensure they are justified and reasonable. Under the ACA, rate increases of 10% or more for individual or small group market plans must be reviewed, though federal authorities lack the power to reject excessive rate hikes in states without an active rate review program.
Reference-Based Pricing (RBP)
When health costs—typically, charges from providers—are evaluated against the Medicare reimbursement rate for the same service. Reference-based pricing is a health care benefit design through which employers or insurers seek to address price variation by placing a cap (or reference price) on clinical services.
Relative Value Unit (RVU)
A measure of value used in the United States Medicare reimbursement formula for physician services; measures the resources used to provide a given service including the physician’s work, the expenses of the physician’s practice, and professional liability insurance. RVUs are a part of the resource-based relative value scale (RBRVS).
Relative Value Update Committee (RUC)
The RUC is a unique multispecialty committee, developed by the American Medical Association (AMA), dedicated to describing the resources required to provide physician services which the Centers for Medicare & Medicaid Services considers in developing Relative Value Units (RVUs). In the past, CMS accepted the RUC recommendations 90% of the time.
Resource-Based Relative Value Scale (RBRVS)
A physician payment system used by Medicare to determine reimbursement rates for medical services. This system assigns relative values to procedures based on three key factors: physician work, practice expenses, and malpractice costs. The final payment is calculated by multiplying the relative value by a conversion factor that is updated annually.
Retail Pharmaceuticals
Drugs available at retail pharmacies by prescription, instead of ones available in a hospital, physician office, nursing home or home health setting (non-retail drugs).
Retroactive Medicaid
Retroactive Medicaid provides coverage for medical expenses incurred up to three months before a person applies for Medicaid, as long as they meet eligibility requirements during that time. This ensures that individuals, particularly those facing sudden illnesses or injuries, can receive care and have their bills covered even before applying. Retroactive coverage is especially beneficial for costly services like nursing home care, offering a financial safety net for those in need.
Risk Adjustment
Payment adjustments made to reflect differences in the underlying health (or other factors) in the patient population—for example, higher payments when the population is sicker than average.
Risk Evaluation and Mitigation Strategy (REMS)
A strategy to manage a known or potential serious risk associated with a drug or biological product.
Risk-Based Capital (RBC) Ratio
The percentage of Authorized Control Level (ACL) surplus held by an insurer is called its Risk-Based Capital or RBC ratio.
Rural-Urban Geographic Disparities
Differential access to health care services and providers due to the geographic setting in which a person resides. Rural areas typically have fewer health care providers than urban areas, which can contribute to disparities in health status.
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Self-Funded Plan
The “safe harbor” regulations describe various payment and business practices that, although they potentially implicate the Federal anti-kickback statute, are not treated as offenses under the statute.
Scope of Practice
Refers to the scope of services that various types of medical professionals are authorized by states to provide.
Scope of Practice Laws
Scope of practice laws establish the legal framework that controls the delivery of medical services. These laws can encompass the full range of health disciplines—ranging from physicians and physical therapists to podiatrists and dental hygienists—and govern which services each discipline is allowed to provide and the settings in which they may do so.
Self-Funded Plan
Also known as a self-insured plan, these are health insurance plans where the employer or union assumes the financial risk for providing health care benefits to enrollees. These plans are regulated by the U.S. Department of Labor and are typically associated with large employers.
Self-Referral
The referral by a physician to a health facility–eg, imaging center–in which he/she has a financial interest.
Serious Reportable Event (SRE)
An often preventable clinical incident that causes significant patient harm. Established by the National Quality Forum, SREs include 29 types of “Never Events” categorized into seven distinct categories, including surgical, procedural, product-related, patient protection, environmental, radiologic, and criminal events. These events serve as a benchmark for safety monitoring and quality improvement in health care settings.
Sherman Antitrust Act
A federal law prohibiting anticompetitive conduct–any “contact, combination, or conspiracy in restraint of trade.”
Short-Term, Limited Duration (STLD) Health Plans
Health plans that only provide coverage for a limited term, typically less than 365 days. Because they are not subject to the consumer protections under the Affordable Care Act, short-term policies are also characterized by significant limitations with respect to covered services and often impose maximum limits on what the plan will pay. They are less expensive, but offer poor coverage and limited consumer protections, and pose financial risks for consumers.
Sin Taxes
A popular term for any tax levied on ‘pleasure poisons’–eg, alcohol, tobacco, sugary or fatty foods.
Single Payer
A system that finances the costs of delivering universal health care for an entire population using a single insurance pool. In many industrialized nations, this kind of publicly-managed health insurance is typically extended to all residents.
Single-Source Drug
Brand-name drugs still under patent protection.
Site-Neutral Payment
A Medicare payment policy that pays the same amount for outpatient services provided at independent offices, ambulatory clinics or hospital-affiliated facilities.
Social Determinants of Health (SDoH)
The non-medical factors that influence health outcomes, including the social, economic, and environmental conditions in which people are born, grow, live, work, and age. SDoH are a key focus in public health policy and interventions aimed at improving population health.
Social Exclusion
A state in which particular groups of people are prevented or blocked from engaging fully in economic, social, political and cultural life.
Social Impact Partnerships to Pay for Results Act (SIPPRA)
Legislation passed as a part of the Bipartisan Budget Act of 2018 that created a pool of capital to support outcomes-based, pay for success financing models. Social impact partnerships are available to entities that are able to produce one or more measurable outcomes that result in social benefit or savings.
Social Medical Models of Care
The primary goal of these models is to systematically improve the quality of care that patients with multiple complex conditions receive while lowering the lifetime cost of treatment.
Social Return on Investment
Similar to financial ROI but Social Return on Investment shows a more meaningful bottom line: the financial impact and the social impact of the investment; brings social, environmental, economic and other outcomes into the decision-making process.
Special Controls
Applicable to Class II medical devices, these FDA controls are usually device-specific and include: performance standards, post-market surveillance, patient registries, special labeling requirements, premarket data requirements and guidelines.
Specialty Prescription Drugs
Drugs that treat chronic, complex or life-threatening conditions, often manufactured through biologic processes and/or targeting a specific gene. Typically, these drugs are costly and require intensive clinical monitoring, complex patient actions, and/or special handling by the dispensing pharmacy. Although most commonly injected or infused, they may also be taken orally or inhaled.
Spread Pricing
Price difference between what a pharmacy benefit manager (PBM) pays a pharmacy for a prescription drug and what it charges the health plan sponsor.
Standard Benefit Design
An effort to standardize cost-sharing and scope of coverage into a few basic insurance plan designs, making it easier for shoppers to compare alternatives. These designs can also incorporate consumer-friendly features such as a preference for copayments over coinsurance.
Standard of Care
Care that is delivered in accordance with clinical practice guidelines or other evidence-based care protocols.
Standardized Infection Ratio (SIR)
A summary statistic that monitors progress towards the prevention of health care-acquired infections (HAIs) over time and serves as an indicator of the frequency of medical harm events. An SIR over 1 indicates that there was an increase in the number of HAIs compared to the national baseline, an SIR of 1 indicates that there were as many HAIs as the national baseline and an SIR lower than 1 indicates a decrease in the number of HAIs compared to the national baseline.
State Drug Substitution Laws
State substitution laws provide authority to pharmacists to substitute lower-cost generics for higher-cost brand drugs. Some states require pharmacists to substitute generics for the brand, some allow pharmacists to do it, and other states require permission from consumers to substitute.
State Innovation Model (SIM)
The State Innovation Models (SIM) initiative partners with states to advance multi-payer health care payment and delivery system reform models. Each state-led model aims to achieve better quality of care, lower costs, and improved health for the population of the participating states or territory. The initiative tests the ability of state governments to utilize policy and regulatory levers to accelerate health system transformation to meet these aims
State-Based Exchange
A health insurance marketplace established by an individual state under the Affordable Care Act (ACA) to facilitate the purchase of health coverage for individuals and small businesses. SBEs manage plan certification, consumer assistance, and regulatory oversight, while some states opt for a hybrid model using federal infrastructure for eligibility and enrollment functions. Under the ACA, states have three Marketplace options: a state-based exchange; a state-based exchange that is hosted on the federal platform, where states are responsible for many of the Marketplace functions, and the federal government is responsible for eligibility and enrollment functions; or a federally-facilitated Marketplace, where the federal government performs all Marketplace responsibilities. Also referred to as a State-Based Marketplace.
Structural Violence
A system in which law, policies, institutional practices, and other societal norms create, and subsequently reinforce, hegemonic social arrangements.
Summary of Benefits and Coverage (SBC)
The Summary of Benefits and Coverage is a standard form that describes the coverage offered by a health plan. Because all private plans use the same format, it is intended to make it easier to compare them on an apples-to-apples basis.
Supplement Pathway
Manufacturers seeking approval for updates or changes to devices they already have on the market submit amendments or supplements to the original Premarket Approval (PMA) submission to the FDA. Depending on the type of changes a manufacturer wants to make, devices face differing evidentiary burdens. Supplements fall into five approval tracks: panel-track, 180-day, real-time, special and 30-day notice
Supply Sensitive Care
Refers to services where the supply of a specific resource has a major influence on utilization rates. This is believed to be a large driver of health care costs.
Surgical Site Infections (SSI)
An infection that occurs in an area of the body on which a surgery took place. As prevention is possible, SSIs are used as an indicator of the frequency of medical harm events.
Surprise Medical Bills (SMB)
An unexpected medical charge that occurs when a patient receives care from an out-of-network provider or facility without prior knowledge, often in emergency situations or during in-network hospital visits where certain providers do not participate in the patient’s insurance network. Surprise billing is also referred to as “balance billing,” as patients are responsible for the difference between the provider’s charge and the insurer’s reimbursement.
Sustainable Growth Rate (SGR)
Enacted as part of the Balanced Budget Act of 1997, the sustainable growth rate formula determines how much Medicare pays for services that physicians provide. Under the SGR, cumulative Medicare spending on physicians’ services is supposed to follow a target path that depends on the rates of growth in physicians’ costs, Medicare enrollment, and real gross domestic product per person. If spending in a given year exceeds the SGR target for that year, then the amounts paid to physicians for each service they provide are supposed to be reduced in the following year to move total spending back towards the target path. The SGR is flawed because it attempts to limit payments without addressing the volume or complexity of services and the formula is rarely followed. In every year since 2003, Congress has prevented the full cuts required by the SGR from going into effect.
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Tax Credits
Tax credits lower the amount of income tax you owe. In the case of the tax credits created by the Affordable Care Act, some low and middle income people can get tax credits that lower the cost of health insurance purchased through the new Marketplaces.
Telehealth
The use of electronic information and telecommunications technologies to support and promote long-distance clinical health care, patient and professional health-related education, public health and health administration. Telehealth can be used to facilitate both provider-to-provider interactions and patient-to-provider interactions electronically.
Telemedicine
A form of telehealth that connects patients to providers. Patients can communicate directly with specialists via videocalls (such as through Zoom), “store-and-forward” transmission of images or information, and remote patient monitoring.
Tiered Formulary
A tiered formulary divides drugs into groups, based primarily on cost. A plan’s formulary might have three, four or even five tiers. Plans negotiate pricing with drug companies. If a plan negotiates a lower price on a particular drug, then it can place it in a lower tier and pass the savings on to its members through lower enrollee cost-sharing requirements (e.g. lower co-payments).
Tiered Network
Tiered provider networks categorize hospitals or physicians into tiers (typically two or three) using cost or some combination of cost and quality metrics. Members in plans with tiered providers pay higher cost-sharing amounts to use the higher cost or less efficient providers in the network. They pay lower cost-sharing amounts with the lower cost or more efficient providers. These networks are essentially a variation of a long-standing practice of providing one level of benefits to enrollees who use in-network providers and lower level of benefits for use of out-of-network providers.
Tobacco Surcharge
A tobacco surcharge is an extra change tacked onto insurance premiums based on a policyholder (or dependent’s) tobacco use. Starting January 1, 2014, insurers in many states will be able to charge tobacco users up to 50 percent more in premiums.
Tort Reform
Tort reform efforts represent a movement to reduce the volume and associated costs of tort litigation, often through legislation that, among other things, may restrict the legal theories that can be used to support plaintiff claims or cap damage awards (especially with respect to the awarding of non-economic and punitive damages).
Total Cost of Care (TCOC)
A single risk-adjusted payment for the full range of health care services needed by a specified group of people for a fixed period of time. Total cost of care payment is very similar to capitation, but may use more sophisticated risk-adjustment methodologies, limit on risk exposure and/or incorporate quality measurement.
Triple Aim
The Triple Aim is a framework for optimizing health system performance: improve the health of the population; enhance the patient experience of care (including quality, access, and reliability); and reduce, or at least control, the per capita cost of care.
Trust Funds for Population Health
Funding raised and maintained to specifically address and support prevention and social interventions to improve outcomes of a targeted population.
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U.S. Preventive Services Task Force
An independent, volunteer panel of national experts in disease prevention and evidence-based medicine. The Task Force works to improve the health by making evidence-based recommendations about clinical preventive services. For more, see https://www.uspreventiveservicestaskforce.org
Underwriting
The process used by insurers to determine a person’s health-insurability using information on health status, health risk, and prior use of medical care. Prior to 2014, the underwriting process was used to set premiums, decide whether to issue a policy, and decide benefits to be offered. Medical underwriting was eliminated by the ACA for coverage that starts January 1, 2014 or later.
Underwriting Cycle
The business cycle in the insurance sector. In the underwriting cycle, insurers compete with each other for clients, resulting in falling premiums and low underwriting standards. Eventually, insurers begin charging higher premiums to ensure adequate reserves, completing the cycle. The underwriting cycle can cause premium trend to diverge from the underlying growth in health care costs.
Underwriting Wear-Off
Also known as “duration,” this is the effect on claims costs of once-healthy people who develop more medical needs after they are insured under the policy for a while. This will no longer be allowed as a rate justification.
Unit Cost Trend
Also known as “price inflation,” this is the increase (or decrease) in the prices the insurer pays to doctors, hospitals, and other health care providers. (This is one of the two most important elements making up Medical Trend.)
Upcoding
A practice whereby hospitals and other providers use billing codes or DRGs that reflect a more severe illness or expensive treatment in order to seek a larger reimbursement from Medicare.
Upstream Investments
Investments in population health and prevention, rather than only in addressing health problems once established.
Utilization Management
The process of evaluating the medical necessity, appropriateness, and efficiency of health care services. Utilization management describes proactive procedures, discharge planning, concurrent planning, precertification, and clinical case appeals. It also covers processes, such as concurrent clinical reviews and appeals introduced by the provider, payer, or patient.
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Value-Based Insurance Design (VBID)
Value-Based Insurance Design aims to increase health care quality and decrease costs by using financial incentives to promote use of cost efficient health care services by consumers. By lowering the cost of effective high-value treatments, health plans can encourage efficient patterns of care. VBID may include disincentives as well, such as high cost-sharing, for health services that may be ineffective or repetitive, or when the same outcome can be achieved at a lower cost using a different approach. To decide what procedures are the most effective and cost efficient, insurance companies may use evidence-based data to design their plans.
Value-Based Purchasing (VBP)
A health care reimbursement model that links provider payments to the quality and efficiency of care delivered. VBP programs incentivize providers to improve patient outcomes and reduce costs by tying reimbursement to performance on quality measures, such as patient safety, care coordination, and preventive services. Also known as Value-Based Reimbursement, this model shifts payment incentives from volume-based to value-driven care.
Vertical Consolidation
When two or more entities providing different services merge or combine operations into a single entity or operation providing complementary services —e.g., a hospital and a physician practice.
Voucher
A check from the government to a recipient for a single purpose, in this case paying for health insurance. In the case of a proposed changed to Medicare, also known as premium support, the check would have to be used in one of two ways. It could be signed over to an insurance company to buy private insurance. Or, if the plan allows it, the voucher can be returned to the government to pay for traditional Medicare. The voucher approach is intended to cap Medicare’s growth in spending.
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Wellness Programs
Wellness programs try to promote health through incentives. Wellness incentives typically come as ‘carrots’ or ‘sticks’. In the ‘carrot’ format, they reduce net insurance costs by a certain amount, provided you engage in healthy behaviors. ‘Sticks’ impose a net-increase if you don’t.
Wholesale Acquisition Cost (WAC)
The price set by the manufacturer. Pharmacies typically purchase drugs based on the Wholesale Acquisition Cost (WAC). The difference between what the pharmacy paid (based on WAC) and what insurers reimburse the pharmacy (based on AWP), is known as the “spread.” The larger that difference, the larger the pharmacy’s profit.