¶ … Health Care Economics
Heath care economics
The health care sector in the United States is faced with a series of challenges given by the dynamic and changing features of the modern day society. Two notable challenges in this sense are represented by moral hazard and demand inducement. These are best explained below:
"First, because of the nature of insurance at that time patients demanded all medical services regardless of cost, even those offering an insignificant health benefit (moral hazard). Second, autonomous providers of the traditional health economy received fee-for-service payments. This creates the incentive for physicians to recommend the extravagant of treatments, even if those treatments are inappropriate to the patients condition (demand inducement)" (University of Canterbury).
In order to address these issues, the concept and practice of managed care have been introduced. The scope of this application is that of creating more efficiency within the health care provision sector. And based on the progress made so far, it can be concluded that managed care has indeed had some positive impacts of moral hazard and demand inducement.
At the level of moral hazard, managed care has sought to eliminate the incentives of the physicians in recommending and providing excessive medical services to their patients. In the reduction of demand inducement, the managed care organizations have decided to pay their physicians fixed salaries, regardless...
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