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Health Services in United StatesThe historic payment system for reimbursing hospitals both by insurers and by Medicare has been Retrospective Cost Based ReimbursementRCBR This system of reimbursement encourages hospitals to over charge in order to cover the costs of the uninsured who utilize the hospital Charges have continued to rise year after year eventually putting the employers at a point where they could no longer afford the payments For physician reimbursements both insurers and Medicare employed the Usual and CustomaryUC approach to reimbursement This practice which averaged the charges for a procedure in a region also encourages doctors to over-charge in order to raise the average amount paid to them for a procedure These two systems RCBR and UC eventually started to suck too much money out of the insurers employers and the MedicareSocial Security trust fund so that interventions were deemed necessary Perhaps the biggest intervention adopted by the private sector to reduce medical service costs was the trend toward businesses self-insuring By doing so they avoided state-mandated benefits that were required if they hired a third-party insurer In addition the money was now paid to claims as they arose rather than prospectively so income could be earned on this capital as it sat in the bank Other intervention to reduce medical service costs mainly involved private insurers as it was difficult for small businesses to self-insure because of low-capitol Underwriting was a typical practice of insurance companies that is excluding some employees from coverage if they have preexisting conditions or if they are employed in high-riskX areas Payment caps are were also employed by insurers as a way to save medical costs This practice meant setting limits for the total amount paid for selected diagnoses These interventions ultimately led to segmentation in the insurance market A shift occurred in the way that insurers calculated premium charges Community rating used to be the norm It involves placing all beneficiaries into a large group and
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