tax credit

A flat amount that can be subtracted from taxes owed. Under the Affordable Care Act (ACA), tax credits are available to some small businesses to subsidize their workers’ health insurance premiums. A tax credit is more valuable than a tax deduction of the same amount, since the deduction reduces taxable income, not taxes owed, by the amount of the deduction.

tax deduction

An amount that can be subtracted from taxable income if spent on a specific purpose. Currently, businesses and the self-employed can deduct the cost of health insurance provided to employees, but health expenses (including insurance) are a deduction for families with group health insurance only after they reach 7.5 percent of income.

tax preference

Employer-paid health benefits are treated under federal tax law as a deductible business expense for the employer, and excluded from taxable income for the worker. This creates incentives for some employers and workers to prefer extra compensation in the form of more health coverage rather than wages.

tertiary care

Health care services provided by highly specialized providers such as neurosurgeons, thoracic surgeons, and intensive care units. These services often require highly sophisticated technologies and facilities.

therapeutic substitution

Replacement of one drug with another drug from the same therapeutic class that the Food and Drug Administration has determined to be equivalent; the substitute has the same active ingredient with the same absorption rate as the original drug. Often, this results in prescribing the less costly compound.

third party administrator (TPA)

A professional firm that provides administrative services to employers who want to self-insure their employees. The TPA does not underwrite the financial risk of providing coverage.

third party payer

Organization, public or private, that pays or insures medical expenses on behalf of enrollees. An individual pays a premium, and the payer organization pays providers’ actual medical bills on the individual’s behalf. Such payments are called third-party payments and are distinguished by the separation among the individual receiving the service (the first party), the individual or institution providing it (the second party), and the organization paying for it (third party).

transitional medical assistance (TMA)

Medicaid coverage for up to one year for families leaving welfare to become self-supporting through work. During this transition period, states are required to continue Medicaid benefits even if earnings increase.


In health care, usually, the process of collecting and reporting health care cost, performance and quality data in a format that can be accessed by the public. It is intended to improve individual decision-making, or the delivery of services, or both, and ultimately to improve the health care system as a whole.


Program providing medical care to the dependents of active duty members of the military and to retired members of the military. Formerly known as the Civilian Health and Medical Program (CHAMPUS), the program is run by the Department of Defense.

trust fund

Federal trust funds are created in the U.S. Treasury to account for all program income, such as Social Security and Medicare taxes, and disbursements, such as benefit payments and program administrative costs. Revenues not needed in a particular year are invested in special non-marketable government securities; therefore, the trust funds represent the total value, including interest, of all prior program annual surpluses and deficits. There are two Medicare trust funds: the Hospital Insurance Trust Fund (HI), which pays for inpatient hospital and related care, and the Supplementary Medical Insurance Trust Fund (SMI), which pays for physician and outpatient services. Medicare Part D prescription drug expenditures are paid out of the SMI Trust Fund.