Pharmaceutical Industry Research Paper Example | Topics and Well Written Essays - 500 words

Pharmaceutical Industry - Research Paper Example Insurance companies work by charging a premium for people to use their service, this premium is often paid in part by employers. To reduce their personal risk, insurance companies spread their services over a large group of people. As a consequence, the insurer receives premiums for taking on the risk for the people that it insures, and calculates the number of people in the group such that any losses are covered by the premiums paid by the rest of the group (Casto & Layman, 2006). Medicare works in a similar way, and is so effective as a business model, that private insurance firms base their models off that of Medicare (Bodenheimer et al., 2002). Medicare is a reimbursement system used in hospitals in the United States. It is large, with spending totaling over $11.7 billion in 1999 (Cotterill & Gage, 2002). Medicare is a form of insurance, using contributions from both employers and employees to make part of the premium for individual coverage. In addition, some individuals who do not have health insurance benefits through their jobs pay a direct Medicare premium which is then matched by the government (Casto & Layman, 2006).Payments from Medicare to hospitals are dependent on the number of patients that are being admitted to the hospital (Bodenheimer et al., 2002). Medicare works to provide reimbursement for costs such as per diem fees, but doesn’t take care of start up costs, some physician costs, and there are no bonuses in Medicare subsidies for superior care. From a health care perspective this means that any increase in care comes at the hospitals own cost, and is not reimbursed, and that the best financia l results come from decisions that result in lower health care (Bodenheimer et al., 2002). An important part of determining how to best treat patients is to look at the costs versus level of care. One example of this kind of decision is the instigation of a program that reduces hospital admissions in