Reimbursements are the act of compensating someone for expenses usually out-of-pocket expense by giving them what they spent. It is common in companies and organizations as companies reimburse employees for trips or for jobs that cost them some expense. Following this logic, medical reimbursement is an arrangement in which employers in the healthcare industry reimburse the portion of health expenses incurred by the employee. Reimbursements are usually tax exempt which is a good thing for doctors. However, medical reimbursements have continued to decline in recent years and its call for wonder what is causing the declining reimbursements in healthcare.
There are key Medicare trends that affect healthcare organizations and these trends are also responsible for this decline in reimbursements either directly or indirectly, one way or the other. These trends were first reported in the 2013 MedPAC report that was submitted to Congress.
- Over the next 10 years, Medicare spending will grow at annual rate of 6.8 percent, consisting of 3.9 percent per-beneficiary growth and 2.9 percent enrollment growth
- From 2004 to 2011, outpatient services per beneficiary grew 34 percent and inpatient admissions declined 8 percent.
- The overall Medicare margin declined from -4.5 percent to -5.8 percent. In 2013, margins are projected at -6 percent.
- MedPAC recommends a 1 percent pay increase for 2014.
- By 2014, there will be significant changes in payment policies, including incentives and reduction in DSH (disproportionate share hospital) payment.
Significant variation in use and spending, which does not correspond to better quality, raises flags that higher healthcare use and spending are not improving overall health and put beneficiaries at risk (both medically and financially).
What these points summarize as is that the number of Medicaid beneficiaries and claims are growing and healthcare organizations are increasingly losing money on Medicare. These payment increases are going against the tide because margins are declining. However, there have been some exceptions as some healthcare organizations have been pretty efficient and have managed to maintain an average of 2% margin. Other healthcare organizations that are losing money trying to mirror these successful organizations who appear to have figured it out by targeting and countering Medicare trends that impact their business.
Difference Between Medical Allowance and Medical Reimbursement
There is a rather common confusing about medical allowance and reimbursement as one is often mistaken for the other. A medical allowance is a fixed part of gross pay that healthcare employees receive monthly and it is taxable income. Medical reimbursement, on the other hand, is a tax-free component of income a healthcare employee receives and it usually equals the amount spent by the employee at a previous time.
For an employee to be eligible for reimbursement under the Income Tax Act, they have to meet specific requirements and conditions that must be met. First of all and pretty obviously, the employee should have spent the amount of money being claimed for reimbursement on medical treatment and this amount should have me spent either on his or her own treatment or on that of a family member’s treatment. The amount should be reimbursed by the employers and it should not exceed fifteen thousand dollars in a financial year. In order to reclaim any money spent, the individual has to submit medical bills to the employer in order to determine that the expenses have been incurred during that financial year.
Given the continued declining Reimbursements in Healthcare, healthcare organizations have to be extra vigilant and watchful on ways they can beat the tide and remain profitable while keeping the patients satisfied and well taken care of all.