Glossary of Health Care Terms



The ability to obtain needed health care (includes consideration of factors such as cost, location, hours of operation, acceptability and transportation).

Adverse Selection

A disproportionately large enrollment of high risk individuals (individuals who might use medical care) into a health plan from a given population.

Benefit Package

Services covered by a health insurance plan and the financial terms of such coverage, including cost sharing and limitations on amount of services.


A health insurance payment mechanism in which a fixed amount is paid per person to cover services; a fixed, per capita (per head) payment.

Carve Out

An approach to providing coverage for a specific type of services (such as prescription drugs, behavioral health care, etc.) under a separate contract from the HMO contract used to provide all other services. (A "carve out" of services from within the general health plan.)

Case Management

Provides monitoring and coordination of the delivery of health services for individual patients to enhance care and manage costs. Used for patients with specific diagnoses or who require high-cost or extensive health care services.

Centers for Medicare and Medicaid Services (CMS) Agency of the Department of Health and Human Services that administers the Medicare and Medicaid Programs.


A type of cost sharing where the insured party and insurer share payment of an approved charge for covered services in a specified ratio after payment of the deductible.

Community Rating

A method used by insurers to establish health insurance premiums whereby an insurer's premium is the same for all individuals in a premium class within a specific geographic area (an average insurance premium).


A type of cost sharing where the insured party is responsible for paying a fixed dollar amount for services used.

Cost Sharing

A health insurance policy provision that requires the insured party to pay a portion of the costs of covered services. Deductibles, coinsurance, co-payment and balance bills are types of cost sharing.

Cost Shifting

A situation wherein a health care provider compensates for the effect of lower revenue from one payer by increasing charges to another payer.

Diagnostic Related Groups (DRGs)

A system of classifying patients on the basis of diagnosis for purposes of payment to hospitals.

Experience Rating

A system used by insurers to set premium levels based on the insured's past loss experience (claims and health care usage).

Employee Retirement Insurance Security Act (ERISA)

Federal guidelines for companies that develop self-funded health and retirement programs. The act precludes regulation of self-funded health plans by state insurance commissions.

FEHBP (Federal Employees Health Benefits Program)

The nation's largest employer-sponsored health benefits program, serving federal workers, retirees, and dependents.

Federal Qualified

An HMO meeting certain federal qualifications under Title XIII of the Public Health Service Act.

Fee-for-Service (FFS)

A method of paying health care providers for individual medical services rendered where a provider bills for each patient encounter or service.

GAO (General) Accounting Office)

Investigative arm of Congress to do bipartisan reports and studies on selective issues requested by members of Congress.

HHS (Health and Human Services)

This cabinet-level department administers all manner of health and public programs. For example, the FDS, HCFA, CDC are all under the Department of HHS.

Health Maintenance Organization (HMO)

A type of managed-care health plan that acts as both insurer and provider of a comprehensive set of health care services to an enrolled population. Benefits are financed by prepaid premiums with limited co-payments and services provided through a system of affiliated providers.

IRA (Individual Retirement Account)

A tax-sheltered account where individuals can set aside money to pay for uncovered medical care expenses; often coupled with a high-deductible catastrophic health insurance policy.

LMRPs (Local Medical Review Policies) Managed Care

Health plans, ranging from HMOs, which generally require enrollees to select from a network of doctors and hospitals and get permission to see specialists, to PPOs, which are more loosely controlled and permit enrollees to see non-network providers at a higher out-of-pocket cost

Group-Model HMO

An HMO that pays a medical group a negotiated, per capita rate, which the group distributes among its physicians, often under a salaried arrangement.

Independent Practice Association (IPA)

An HMO that contracts with individual physicians to provide services to HMO members at a negotiated per capita or fee-for-service rate. Physicians maintain their own offices and can contract with other HMOs and see other fee-for-service patients.

Staff-Model HMO

An HMO in which physicians practice solely as employees of the HMO.


Insurance providing protection against loss. In health care, the beneficiary is paid cash to cover the cost of the loss (service charges) they incur and pay.

Health Plan

An organization that acts as insurer for an enrolled population. It may be structured as a FFS or managed-care plan.

Managed Care

Any health service payment or delivery arrangement where the health plan attempts to control or coordinate use of services by its enrolled members in order to contain expenditures, improve quality, or both. Arrangements usually involve a defined delivery system with providers who have some form of contractual arrangement with the plan.

Managed Competition

An approach to health system reform in which health plans compete to provide health insurance coverage for enrollees. The system relies on market incentives (namely more subscribers and revenue) to encourage health care plans to restrain the cost of care. Typically, enrollees sign up with a purchasing entity that buys the services of competing health plans. Enrollees are provided a choice among the contracting health plans.


The federal-state program providing health and long-term care coverage to low-income people, including children, certain categories of adults, and the aged, blind, and disabled.


The federal health insurance program for virtually all elderly people and some with disabilities who are under age 65.

OIG (Office of Inspector General)

Each cabinet level department has an OIG to investigate and report on potential fraudulent or abusive practices in the federal programs under the purview of that department.


A hospital payment method where predetermined fixed amounts of money are paid per day for all services provided to a patient admitted for care. Different rates are usually set for each service area (medical/surgical, intensive care, etc.)

Point-of-Service Plan

A managed -care plan that combines features of both prepaid and FFS insurance. Health plan enrollees decide whether to use the providers in the managed care network or non-network providers at the time care is needed. They are usually charged a sizable co-payment for selecting the latter.

Practice Guideline

An explicit statement of what is known and believed about the benefits, risks and costs of particular courses of medical action. Guidelines are intended to assist practitioners, patients and others as they choose the appropriate health care for specific clinical conditions.

Pre-existing Condition

A health condition that was diagnosed, treated or existed prior to the issuance of an insurance policy.

Preferred Provider Organizations (PPOs)

A managed-care health plan that contracts with networks or panels of providers to furnish services. They are paid on a negotiated fee schedule. Unlike HMOs, PPOs do not provide the services themselves. Enrollees are offered a financial incentive to use providers on the preferred list, but may use non-network providers as well.

Primary Care

Health care delivery that emphasizes first contact care and assumes overall and ongoing responsibility for the patient.


An amount paid periodically to purchase health insurance benefits.

Prospective Payment System (PPS)

The Medicare payment system based on the DRG classification system and used to pay hospitals for inpatient hospital services. (A method of reimbursement based on a preset payment, not on the amount or frequency a medical service is provided as in the fee-for-service. PPS under Medicare is generally based on a per diem, or per discharge formula.

Quality Assurance

A formal, systematic process to improve quality of care that includes monitoring quality, identifying inadequacies in delivery of care, and correcting those inadequacies.

Rate Setting

An approach to cost containment where the government establishes payment rates for various categories of health services.


An insurance arrangement where an insurer pays a premium into a pool and any claims paid by the insurer above a predefined dollar level are covered in whole, or in part, by the pool.

Resource-Based Relative Value Scale (RBRVS)

An approach to reimbursement to physicians that develops values for health care procedures and services on the basis of the resources involved in providing a service (required skill level, education training, time involved and overhead costs).

Standard Benefit Package

A defined set of health insurance benefits that all insurers are required to offer.

SCHIP (State Children's Health Insurance Program)

A federal-state program designed to increase coverage of low-income children by expanding Medicaid or creating new state insurance programs.

Usual, Customary and Reasonable (UCR)

A method used by private insurers for paying physicians based on changes commonly used by physicians in a local community. This is sometimes called customary, prevailing and reasonable charges.

Utilization Review (UR)

The review of services delivered by a health care provider or supplier to determine whether the services are medically necessary. The review may be performed on a concurrent or retrospective basis.



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