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Healthcare Sector Finance

Student's Name
Department, Institutional Affiliation
Course Name
Instructor's Name
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Healthcare Sector Finance
Out-Of-Pocket Expenses
Direct payments made by patients to hospitals and medical facilities that are not later
reimbursed by the specific insurance companies that the patients' are ascribed to are known as
out-of-pocket expenses. Expenses for services that are not covered under the patient's insurance,
the copayment for services covered by the patient's insurance, coinsurance, and deductibles are
examples of out-of-pocket expenses in the healthcare sector (Heath, 2019). Out-of-pocket
expenses make it crucial for patients to choose a medical cover and company that offers
favorable insurance cover, copayments, and deductibles to not incur any out-of-pocket expenses.
Out-of-pocket expenses have a negative impact on a patient's access to medical care.
Scholars argue that patients are less likely to seek and access medical treatment when they have
to incur high out-of-pocket expenses as there is an increased burden of costs. A May 2016 survey
by Physicians Foundation revealed many patients do not utilize primary care services due to high
out-of-pocket expenses despite the patients being satisfied with the primary care (Heath, 2019).
Additionally, only 72 percent of patients purchase the full prescribed medicine. Only 3 out of 4
patients return for follow-up check-up or attend the treatment process due to high out-of-pocket
costs.
Subsequently, the impact of out-of-pocket expenses negatively impacts the population's
health. As patients skip full access to treatment and medication due to out-of-pocket expenses,
this results in deterioration of the health condition. American College of Emergency Physicians
and Morning Consult study reveals that the health condition of every one out of four patients that
did not complete the medical treatment process deteriorates after some time.

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Formularies
Health care plans and insurance have different types of drugs that the patients can access,
and the health cover is responsible for the costs incurred to purchase and administer the drugs.
The list of drugs, mainly prescription drugs that the patient's health insurance copays, is a
formulary (Rand & Persad, 2019). Contrary to that, non-formulary is a list of prescription drugs
that the patient's medical insurance does not cover. Thus the patient will have to incur out-ofpocket expenses to purchase and administer the drugs. The formulary list covers both generic
name drugs and company name-brand drugs. The formulary list differs with different health care
plans, including the amount the health care plan will copay. Immunosuppressants, antiretrovirals,
antipsychotics, antineoplastics, antidepressants, and anticonvulsants are the main types of drugs
included in Medicare formularies (Rand & Persad, 2019). Medicare, however, does not accept
over-the-counter drugs.
Formularies are very useful to patients despite the high cost of manufacture and
production of the drugs in the list. Minimizing the total costs of medical access to patients
through formularies is the first benefit for formularies. The copaying for the drugs by health care
plans result in fewer costs burden on the patients as they now incur fewer costs to purchase
prescribed drugs. Secondly, reduced medical costs on patients through formularies results in
increased access to quality and affordable medical care. With reduced medical costs, more
patients can access vital medical procedures like primary care by physicians. They have
subsequently improved access to medical care to result in increased life quality of the patient.
Patient's health improves as they can access full medication through formularies; thus, their
health state improves, and so does their quality of life.

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Pharmacy Benefit Managers
Pharmacy Benefit Managers influence doctors' and pharmacists' operations and behaviors
to ensure that patients are prescribed the most appropriate drug depending on their medical
condition. The first role that Pharmacy Benefit Managers play in healthcare financing is
designing formularies, including determining which drugs to be included in the lists and ensuring
health insurers abide by the list (Heath, 2020). Secondly, Pharmacy Benefit Managers have a
high purchasing power in the healthcare sector that they utilize to negotiate discounts and rebates
from drug manufacturers. According to Medicaid and Medicare services centers, drug spending
growth has been slowed over the last three years. The overall prices of drugs reduced due to the
Pharmacy Benefit Managers' robust negotiations with drug manufacturers for larger rebates.
Additionally, Pharmacy Benefit Managers are in direct contact with retail pharmacies and thus
communicate with the pharmacies about reimbursement of drugs dispatched by beneficiary
organizations.
The key issue surrounding PBM's is that they operate with little transparency. Key
aspects of the PBM's operation like the actual costs of rebates negotiated, sponsors and
beneficiaries of reimbursed drugs, and terms and conditions of the contracts negotiated with the
beneficiaries. The second issue surrounding PBM's is the disparity of drug prices in different
pharmacies. According to a Medicaid and Medicare Services study, community pharmacies sell
drugs as lower as 83 percent than mail-order pharmacies.
The Supreme Court's ruling in Arkansas vs. PBMs case was that ERISA does not
preempt Arkansas' Act 900 that ensures PBMs reimburse pharmacies a higher rate than the rate
the pharmacies pay to fill prescriptions (Donovan & Noble, 2020). The impact of these rulings is

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that other states may adopt the same policy, thereby regulating the operations...