Payment for Services

Abstract

This chapter departs from the general plan of exposition by omitting a section on “Policies and programs today”, as these are closely intertwined with “The main problems today” affecting payment for services.

The problems of payments must be viewed with an eye to many of the other issues considered in the Sandoz Institute survey. Income in retirement, family and community support, and volunteer activities, as well as provision of services, bear upon costs and ability to pay.

Payment for services can be approached from several angles, principally: cost of services to the client or patient; revenues available to the service organization from reimbursement, direct charges, philanthropy, and government subsidy; and what society as a whole pays, in taxes and privately, as a percentage of gross national product.

At probably no other single point do the problems of a growing elderly population come into conflict more clearly with other social priorities than in the context of payment for health and social services.

The amount of payment for these services by retirees has obvious implications for their standard of living. Service charges may constrict already tight budgets for food, clothing, shelter, and other essentials, possibly endangering the very independence the services may aim to preserve. Moreover, social status, mental and physical well-being, and self image may be undermined by threats to, or actual declines in, living standards for those in or near poverty.

Services may be provided without direct charge to the individual, thus protecting living standard. They may be provided at a nominal charge or at a charge geared to income level through a means test, thus splitting the cost between beneficiary and third-party payers, including government. In many countries, payment appears to be more generous if the se vice is labeled as a health service. In the realm of long-term care, which involves costs of room and board, cleaning and other custodial or hotel services, recreational services, nursing, rehabilitation, speech and other therapies, and physicians’ services, the definition of costs is complex and arbitrary. A change in categorization of patient (as needing skilled or lesser nursing, as likely to recover with active therapy or not, as being poor or not), or whether the service is a health or other service, may affect who is obligated to pay and how much of the cost is recognized for third-party payment.

Payment may be from public and private pools, such as tax revenues or insurance. Burdens on the tax system may add to pressure for tax reform and increase inter-generational conflict. As a matter of conserving these funds, public policy-makers may be attracted to means testing, larger deductibles and cost sharing, tighter eligibility requirements, and longer lists of excluded services. In the United States, Medicare over the years has been covering less and less of personal health expenditures for the elderly; it now covers 40% or less. Shifting more expense to the beneficiary may pose threats to living standard, including health status, and create tensions within the family and community.

Payment problems are politically charged issues. The creation of benefits paid by a governmental program may establish constituencies of beneficiaries and providers of service. Their special interest in shaping or preventing legislative and regulatory changes is intensified in periods of retrenchment. An incomplete set of service benefits for the elderly may remain incomplete in the competition for funds, particularly by providers of current benefits. Prospects of expanding long-term care services are particularly at risk.

The design of insurance influences costs, quality, and accessibility of care. In so far as insurance improves the individual’s ability to pay or be paid for, costs or charges will increase in the absence of controls on providers of care. Often the need for cost curbs is obvious, but a scientific basis is lacking for designing them with the least upset to professionally sound courses of patient or client management. In Italy, measures are being taken to control drug costs and shorten hospital stays, but they are not based on objective research. Even where providers are employed by government, costs may rise despite attempts at austerity. Difficulties in constructing controls that are effective and perceived to be fair to beneficiary and provider seem to be never ending.