Chapter 18

Diagnosis-related groups (DRGs)

Method for reimbursing hos-pitals under the Medicare program. Under this system, a flat, uniform amount is paid to each hospital for the same type of medical care or treatment.

Primary insurance amount (PIA)

Monthly cash benefit paid to a retired worker at the full retirement age, or to a disabled worker eligible for benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program.

Hospital Insurance (Medicare Part A)

Part A of Medicare that covers inpatient hospital care, skilled nursing facility care, home health-care services, and hospice care for Medicare beneficiaries.

Medicare Part B

Part B of the Medicare program that covers physicians' fees and other related medical services. Most eligible Medicare recipients are automatically included unless they voluntarily refuse this coverage.

Medicare Prescription Drug Coverage (Part D)

Plans that provide coverage for prescription drugs under the Medicare pro-gram; beneficiaries have a choice of plans.

Liability without fault

Principle on which workers compen-sation is based, holding the employer absolutely liable for occupational injuries or disease suffered by workers, regardless of who is at fault.

Medicare Advantage Plans (Part C)

Private health plans that are part of Medicare that allow beneficiaries to choose alter-nates to the Original Medicare Plan, such as Medicare HMOs, Medicare PPOs, Medicare special needs plans, and Medicare private-fee-for-service plans.

Extended benefits (EB) program

State unemployment compensa-tion programs pay additional weeks of benefits to work-ers who exhaust their regular benefits in states with high unemployment. Most states pay regular benefits up to 26 weeks. The basic extended benefits (EB) program provides up to 13 additional weeks of benefits to workers who have exhausted their regular benefits. Some states with high unem-ployment pay extended benefits for even longer periods.

Currently insured

Status of a covered person under the Old-Age, Survivors, and Disability Insurance (OASDI) program who has at least six credits out of the last 13 quarters, ending with the quarter of death, disability, or entitlement to retirement benefits.

Disability-insured

Status of an individual who is insured for disability benefits under the Old-Age, Survivors, and Dis-ability Insurance (OASDI) program.

Unemployment Insurance

programs are federal-state programs that pay weekly cash benefits to workers who are involuntarily unemployed.

Monopoly State Fund

requires covered employers to purchase workers compensation insurance from a state fund, and private insurers do not compete for the business.

Means Test

used in public assistance; welfare applicants must show that their income and financial assets are below certain levels as a condition of benefit eligibility.

Fully insured

Insured status of a covered person under the Old-Age, Survivors, and Disability Insurance (OASDI) program. To be fully insured for retirement benefits, 40 credits are required.

Experience rating

(1) Method of rating group life and health insurance plans that uses the loss experience of the group to determine the premiums to be charged. (2) As applied to property and casualty insurance, the class or manual rate is adjusted upward or downward based on past loss experience. (3) As applied to state unemployment insur-ance programs, firms with favorable employment records pay lower unemployment compensation tax rates.

Fellow-servant doctrine

A common-law defense used by employers to defend a claim of negligence by employees injured on the job. Under this doctrine, injured workers could not collect for their injuries if the injury resulted from the negligence of a fellow worker.

Social adequacy

A principle followed in the Social Security program; benefits paid are heavily weighted in favor of certain groups, such as low-income groups and large fam-ilies. The actuarial value of the benefits received substan-tially exceeds the actuarial value of their contributions.

Individual equity

A rating principle followed in private insur-ance; there is a close actuarial relationship between the benefits received and the premiums paid.

Full retirement age

Age at which full unreduced retirement benefits are payable to beneficiaries under the Social Secu-rity program.

Contributory negligence doctrine

Common law defense block-ing an injured person from recovering damages if he or she has contributed in any way to the accident.

Assumption-of-risk doctrine

Defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation.

Fully funded program

In a fully funded pension program, the accumulated trust fund assets plus the present value of future contributions are sufficiently high to discharge all liabilities over the valuation period.

Credit (quarter of coverage)

In the Social Security program, a certain number of credits (also called quarters of coverage) based on covered earnings that are required to collect retire-ment, disability, and survivor benefits. For 2015, workers receive one credit for each $1,220 of covered earnings. A maximum of four credits can be earned each year.

Workers compensation

Insurance that covers payment of all workers compensation and other benefits that the employer must legally provide to covered employees who are occupa-tionally disabled because of a job-related accident or disease.

Earnings test (retirement test)

Test under the Old-Age, Sur-vivors, and Disability Insurance (OASDI) program that reduces monthly cash benefits to those beneficiaries who have annual earned incomes in excess of the maximums allowed.

Social Security.

The Old-Age, Survivors, and Disability Insur-ance (OASDI) program, commonly known as Social Security, is the most important social insurance program in the United States. Social Security was enacted into law as a result of the Social Security Act of 1935. The OASDI program provides retirement, survivor, and disability ben-efits to the vast majority of workers in the United States.

Describe the basic characteristics of social insurance programs.

The basic characteristics of social insurance programs are: Most programs are compulsory Programs are designed to provide a floor of income Programs pay benefits based on social adequacy rather than individual equity Benefits are loosely related to earnings Programs, benefits, and benefit formulas are prescribed by law A formula means test is not required Full funding of benefits is unnecessary Programs are designed to be financially self-supporting

The OASDI program has several types of insured status. Briefly explain the meaning of the following: Disability insured

The number of credits required to received disability benefits depends on your age when you become disabled.

Explain the reasons for social insurance programs in the United States.

The reason for social insurance programs in the United States is: To help solve complex social problems Provide coverage for risks that are difficult to insure privately Provide a base of economic security to the population

The OASDI program has several types of insured status. Briefly explain the meaning of the following: a. Fully insured

To attain a fully insured status and be eligible for retirement and survivor benefits, you must have 40 credits

Average indexed monthly earnings (AIME)

Under the OASDI program, the person's actual earnings are indexed to determine his or her primary insurance amount (PIA).

Delayed retirement credit

Under the Social Security program, a credit is available if the worker delays receiving retire-ment benefits beyond the full retirement age. The primary insurance amount is increased by a certain percentage for each year of delay (computed monthly) beyond the full retirement age up to age 70.

Short Term Involuntary Unemployment

Weekly cash benefits are paid to unemployed workers during periods of short-term involuntary unemployment, thus helping them maintain their eco-nomic security.

The OASDI program has several types of insured status. Briefly explain the meaning of the following: b. Currently insured

You are considered currently insured, and eligible for survivor benefits, if you have earned at least 6 credits in the past 13 calendar quarters.