Laksono 2013 Lecture 4.2 Payment Mechanism

8/11/2019 Laksono 2013 Lecture 4.2 Payment Mechanism

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Lecture note Week 2-

3:

Provider

Payment

Mechanisms

Laksono TrisnantoroDepartment of Public

Health


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Content

Lecture Description

Key-terms

Sections of Lectures References

Pertanyaan (essay)


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Lecture Description

Indonesians are still relying heavily on out of pocket

spending on health care.

It means people have to pay directly to the health

providers when they got sick.

In the near future, Indonesias health financing system will

be changed to insurance based.

Therefore, instead of the patients, there will be other

parties (insurance agency or government) who will pay the

doctors.

These agencies will implement several payment

mechanisms for physician.


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Based on the timing:

Two types of payment mechanisms

1. prospective

payment system;

and2. retrospective

payment system

Can be for medical

doctors and hospitals

The lecture is

concerned more inmedical doctor

payment


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Capitation

Prospective payment system:

Capitation and Budget

Government

Health

Insurance

Doctor

Hospital

Patient

Tax

premium

Budget

In Primary Care

At Hospital


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Salary

Prospective payment system

Salary for medical doctor

Government

Doctor

Patient

Tax

In Primary Care

At Hospital


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Retrospective payment system (1):

fee for service from out of pocket for MD and hospital

Doctor

Hospital

Patient

Payment From Out of

Pocket


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fee for service from insurance company/government

for MD

Tax

premiu

m

Doctor

Patient Government

Health

Insurance

FFS,

Bonus

Payment from

government/insuranc

e company

Hospital


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The Dilemma

Retrospective payment

system is more

favorable to doctors

because it will increasetheir motivation and

satisfaction.

On the other hand,

prospective payment

system is more of the

government orinsurances choice

because it provides

better efficiency and

quality.


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In this lecture,

we will describe the detail of these

mechanisms so that the students will be

prepared for their future working

environment.

Whether it will be in government or in private

sector, in market driven environment or in

insurance based health financing system.


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Key-terms

Payment Mechanisms

Health Financing

Health Insurance

Out of Pocket

Fee for service

Salary

Bonus

Capitation

Budget

Retrospective payment

Prospective payment


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Section of Lectures

1. Introduction

2. Indonesian Health Financing System

3. Type of Provider Payment System4. Doctors Life Satisfaction and payment

system

5. Comparing Malaysia and Indonesia6. The Future of Medical Doctors payment

mechanism


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1. Introduction

Provider Payment Mechanism = The way ofpaying the doctors

Basically there are two types of Provider

Mechanism System: Prospective payment system: Capitation, salary,

DRG

Retrospective payment system: fee-for-servicefrom out of pocket or from government/insuranceand bonus.


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Which one is better in term sof

Quality and Efficiency?

Prospective paymentsystem is consideredbetter in providingefficiency and qualitycontrol.

In primary care level,most commonly usedmethod is capitationpayment system

How and

Why?


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2.

Indonesian health financing

system


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9/3/2014 16

Study by Equitap Group in 2001


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9/3/2014 17


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9/3/2014 18


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9/3/2014 19


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How Pay for Health CareSince 2004, Indonesia increased the Social Insurance


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How Pay for Health CareWhat is the impact?

-Reduce the out of pocket- Increase the

prospective payment


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3. Type of Provider Payments

Based on

Source ofPayment


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Some sources of Payment

Out of Pocket

Government Revenue Social and private

insurance.


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Out of Pocket using fee-for service

Doctor

Hospital

Patient

Payment From Out of

Pocket


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What is the meaning of Fee for

service?

Doctors are paid based on the service

provided

It is a market forces mechanism

It is difficult in making standard of fee

Doctors are happy. The income depends on

the productivity

Patient satisfaction is high because the doctor

has more attention.


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Problems and Solution : fee for service

Problems

1. Tendencies for supplier induced

demand

2. Under referal. Doctors tend to

keep the patient.

3. Increasing health cost inflation

4. Difficult to have a proper budget

5. The higher income groups enjoy

better care. The poor will be

marginalized

Solution

1. Utilization

review

2. Quality

assurance


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Notes: Supplier Induced Demand

The Doctor prescribes, orders, or

gives treatment not based on

patient need, but demand

The demand of patients can be

induced by doctor motivation to

have financial benefits from the

patients.

Why?

There is a different of knowledge

between doctors and patients


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Government Revenue:

Doctors are paid by salary;

For primary care can be paid by capitation;

For hospital care: Using DRG.


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Salary


Salary for medical doctor

Government

Doctor

Patient

Tax

In Primary Care

At Hospital


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What is the meaning of Salary

A monthly payment for medical doctor

Medical treatment is not influenced by

economic incentives

Planning and budgeting is easier

If the salary is low, there is a problem of

productivity


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Capitation


Capitationand Budget

Government

HealthInsurance

Doctor

Hospital

Patient

Tax

premium

Budget

In Primary Care

At Hospital


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What is the meaning of

Capitation?

Concept: payment by insurance company to

health providers for services they deliver,

where the amount is not based on the type

and or amount of health services provided,but based on the number of

members( Feldstein, 1983)


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One type of Prospective payment system is

Capitation that is now implemented by the

largest insurance company in Indonesia PT

Askes.

in capitation payment mechanism the doctors

are paid before they provide service.


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Problems and Solution in Capitation

Problems

1. Underutilization

forprofit maximisation

(supplier reduced

demand)

2. Doctors attention may

be low

3. Patient satisfaction

tends to be low

4. Excessive referral

Solution

1. Utilization review

2. (quality assurance)

3. Complain management


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Social and private insurance:

Primary health care paid

by capitation,

Secondary and tertiary

care paid by:

salary and/or

fee for service.


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fee for service from insurance company/government

for MD (at secundair and tertiary care)

Tax

premiu

m

Doctor

Patient Government

Health

Insurance

FFS,

Bonus

Payment from

government/insuranc

e company

Hospital


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4. How is Medical Doctor

perception?


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Doctors Life Satisfaction

The function:

f( Income, Leisure, and Deed)

Doctors satisfaction derive


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Doctors satisfaction derive

from individual culture

Materialism

(Income andLeisure)

Humble and modest

(Deed, charity,philanthropist)

39


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The Income consists of:

Salary +

Fee-for-service +

Capitation +

Minus:

Cost of treatment and Income Tax

i l i d


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5. Comparing Malaysia and

Indonesia


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Medical Doctor in Indonesia: Earning at Risk,

In Malaysa: Salary based

Standard

Income

Unlimitedincentives

based

on market

forcesLimited

incentives

Salary

Traditional

Payment

Incentive

Payment 42Earning at risk

Salary

Salary


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From where the incentives?

Fee from the hospitals

Some illegal payment

from pharmaceutical

industry Some illegal payment

from laboratory and

medical equipment

Private practice Based on fee-for-service

mechanism


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The impact of fee for service in Indonesia:

There is no standard income

Province GP Internist Surgeon Ob-Gyn Pediatrician

N Sumatera 3,965 10,505 19,657 18,033 6,810

Bengkulu 6,205 22,600 20,650 74,924 18,600Jakarta 3,351 33,790 14,477 24,809 21,878

C. Java 8,162 23,875 27,550 25,833 17,250

Jogjakarta 2,154 9,810 19,769 18,241 6,584

NTB 6,830 14,466 21,667 54,050 16,974

N. Sulawesi 9,041 20,361 20,978 22,760 7,845

Papua 4,578 22,062 24,150 37,883 24,235

TOTAL 6,174 18,886 19,317 29,388 14,490


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Professional Income

Pilot, accountant,bank employee Salary and limitedincentives

Medical doctor

Artist, singer,painter, football

player

Earning at Risk

The Unlimited Incentives

45

U li it d i ti i f f


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Unlimited incentives in fee-for-

service

Increasing the income gap between doctors

Inducing cost of service in-efficiency

Reducing the quality of hospital care

Reducing the competitiveness of hospital


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The biggest problem

Supplier Induced Demand

Doctors

Patient

s

Hospital

Wants

Needs

Demand

Doctors intentionally

increase the demand ofhospital care based on

economic incentive,not

patients need.


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How to prevent these problems?

One possible solution: the Managed Care


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Managed Care

System that manages healthcare delivery withthe aim of controlling costs. A cost containment

system that directs the utilization of health

benefits by:

(a) restricting the type, level, and frequency of

treatment;

(b) limiting the access to care; and

(c) controlling the level of reimbursement for services


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6

The Future of Medical

Doctor PaymentMechanism


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How is the Future

Medical Doctors who work in relatively

free market

Medical Doctors who work in managedcare and salaried system


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Professional Income

Pilot, accountant,

bank employee

Salary and limited

incentives

Managed-Care

Medical doctor

Artist, singer,

painter, footballplayer

Earning at Risk:

Free- Market

The Future

52


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What are theimpacts to

medical

doctors?

Health Care


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49% people


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49% people


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49% people


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49% people


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How the doctor options for the

working place?


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The future

1. Some of you will work

in high income

environment

2. Some of you will work

in limited income

environment

Is the number

1 alwayshappy?

Happiness is not a matter of having high


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pp g g

income

Materialism Humble and modest

60


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Summary

Doctor Payment Mechanism is a complex issue, which is influenced byHealth Financing Scheme, political economy condition, and culture.

Doctor payment mechanism timing can be prospective and retrospective

one.

It can be in the forms of fee-for service, salary, capitation, or combination.

The source of payment is a complex combination of: out of pocket, health

insurance payment, and government salary.

The behaviour of medical doctors relate to this payment mechanism and

may affect quality of care.

There are various possibilities of the payment mechanism in the future. Medical Student should prepare for having limited income or unlimited

ones.

Happiness is not only a matter of high and unlimited income.

References


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References

1. Abbey, D. C (2009) Healthcare Payment Systems: AnIntroduction

2. Kongstvedt, P (2008) Managed Health Care Handbook

3. Rokx, C, Schieber G, Harimurti, P, Tandon A, Somanathan, A.

(2009) Health Financing in Indonesia. A Reform road map.4. Trisnantoro, L (2007) Memahami Penggunaan Ilmu Ekonomi

dalam Manajemen Rumah Sakit, Gadjah Mada University

Press, (can be downloaded in

www.kebijakankesehatanindonesia.net)
http://www.kebijakankesehatanindonesia.net/http://www.kebijakankesehatanindonesia.net/


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Questions

Why is payment for doctors should beregulated?

What motivates doctors to work

professionally?

How should insurance company/government

negotiate with doctors association to reach

better understanding in paymentmechanisms?

Laksono 2013 Lecture 4.2 Payment Mechanism

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