Fee For Service Payment System

In the United States, everyone pays for healthcare including insurers, employers, the government, and individuals. Public insurers became increasingly concerned by the rising cost of healthcare and something had to be done to resolve the issue. This paper discuss the various payment system implemented by Medicare post World War II to help assist with maintaining the cost of healthcare in the nation. These systems were: fee-for-service (FFS), usual customary and reasonable (UCR), diagnosis-related groups (DRGs), lastly health maintenance organizations (HOMs).

Payment Mechanism

Fee-for-service is a retrospective reimbursement system in which providers create a comprehensive list of services they provided to a patient and the materials, supplies, and facilities they used to provide those services and then bill the patient’s insurer (or the patient, if he/she is self-pay) for each item on the list (Cellucci et al., 2014). Traditionally physicians were reimbursed on a fee for service basis. In a fee for service arrangement, physicians were paid based on the numbers of services administered to the patients. Fee for service gave providers an incentive to provided more treatment because payment was dependent on the quantity of care rather than the quality of care. Some of the disadvantages of

It is a managed care delivery system that merges the provision of care and the reimbursement function of health insurance. Originally this system was not implemented to save money, they were intended to revolutionize the delivery of healthcare by reversing all the perverse incentives driving the healthcare industry. HMOs was designed to deliver front end care to assist people to stay healthy. HMOs assigned patients to physicians who orchestrated their care rather than having ill-informed healthcare consumers move from one provider to another and receive medically unnecessary treatments (Cellucci et al.,