Week 4
MARKET COMPETITION IN MEDICAL CARE
ANSWER THE FOLLOWING QUESTIONS:
1). what are the different cost containment strategies used by managed care firms?
SAMPLE ANSWER FOR QUESTION 1. DO NOT COPY
The least restrictive HMO plan is the fee for service plan (FFS). This plan allows consumers the opportunity to select any physician they want, including specialists, and makes the consumer accountable for deductibles and out of pocket fees to the maximum per year out of pocket expense. Elective hospital stays and outpatient services require pre-authorization. Cost containment strategy: The consumer is responsible for saving money by decreasing un-necessary and elective visits that they are financially responsible for. To off set the expense of self-referred care the consumer is charged higher premiums for FFS.
More restrictive is the preferred provider organization (PPO) plan. Providers are selected if they agree to provide service at a discounted fee. The provider must also be considered to be an appropriate user of medical services to qualify. When the consumer selects a member of the PPO for care the deductible for the service requested is less expensive. Going outside the PPO will cost the consumer more for the same service. Cost containment strategy: Lower payment to providers for most used services. The consumer is penalized by going outside the PPO network so will make every effort to seek care using a PPO provider.
HMO models are the most restrictive. Consumers are not permitted to go outside the care organization for services. To be fully covered at reduced co-pay the consumer must use the care organization contracted by the HMO. Cost containment strategy: There is no negotiating fee for service paid to the provider. The provider is incentivised and paid a bonus for reduced use of services. The consumer is encouraged to remain within the HMO for care or become personally liable for charges incurred outside the HMO.
2). How do fee for service and capitation systems affect the physician’s role as the patient agent?
3). Why are hospitals able to charge different purchasers different prices for the same medical services?
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