Diagnosis related groups (DRG) is a classification system used to determine prospective
compensation payments in the Medicare Hospital Insurance program.
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Resource-based relative value scale system is a set of values based on time and effort of physician
labor used to determine physicians' fees in the supplementary medical insurance component of
Medicare.
Medicaid is a federal- and state-financed health insurance program for the poor.
State Children's Health Insurance Program (SCHIP) is a program that expanded Medicaid eligibility to
some children with family incomes above Medicaid limits.
Crowd out refers to when public provision of a good leads to a reduction in private provision of the
good.
The single-payer approach would scrap the current health insurance market and replace it with a
single provider of health insurance. It would be funded by taxes and provide all citizens, regardless of
income or health status, with a specified set of health care services, at no (or low) direct cost to the
insured.
The market-oriented approach reforms health care by lowering costs and increasing access by
harnessing the power of competition.
Chapter 11
An annuity is an insurance plan that charges a premium and then pays a sum of money at some
regular interval for as long as the policyholder lives.
Consumption smoothing is reducing consumption in high-earning years in order to increase
consumption in low-earning years.
Asymmetric information is a situation in which one party engaged in an economic transaction has
better information about the good or service traded than the other party.
Adverse selection is the phenomenon under which the uninformed side of a deal gets exactly the
wrong people trading with it (that is, it gets an adverse selection of the informed parties).
Moral hazard occurs when obtaining insurance against an adverse outcome leads to changes in
behavior that increase the likelihood of the outcome.
Fully funded is a pension system in which an individual's benefits are paid out of deposits that have
been made during his or her working life, plus accumulated interest.
Pay-as-you-go (unfunded) is a pension system in which benefits paid to current retirees come from
payments made by current workers.
Supplemental Security Income (SSI) is a welfare program that provides a minimum income guarantee
for the aged and disabled.
Average indexed monthly earnings (AIME) is the top 35 years of wages in covered employment,
indexed each year for average wage growth. The AIME is used to compute an individual's Social
Security benefit.
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Primary insurance amount (PIA) is the basic Social Security benefit payable to a worker who retires at
the normal retirement age or becomes disabled.
