Question

In: Economics

a)Briefly explain how the managed care tactics of a) coverage networks, b) vertical integration, and c)...

a)Briefly explain how the managed care tactics of a) coverage networks, b) vertical integration, and c) fixed payments can help reduce premiums.

b)State and explain two different ways to fix the problem of risk selection and two different ways to solve the problem of adverse selection in Bismarck systems.

c)State and briefly describe four policies aimed to curb the impact of population aging on health finances

Solutions

Expert Solution

a)

Coverage Networks - Managed care is a type of medical benefit. The word managed care is used to describe a group of activities apparently planned to reduce the cost of providing health care while improving the quality of that care techniques. It is a system of delivering health care services which is provided by a specified network of doctors and hospitals. Providers receive a certain amount for providing all required medical care to enrollees. One of the most important forms of managed care is the use of a network of healthcare providers to provide care to enrollees. The patients can only receive care from list provider.

Vertical Integration - Vertical integration is a competitive strategy in which a company takes complete control over in the production or distribution of a product. It links services that are at different stages in the production process of health care. Health networks are formed through vertical integration. It helps to smoothen its supply chain, make its distribution and after sales service more efficient, to maximise profit.

Fixed payments can help reduce premiums - Provider networks are be used to reduce costs by negotiating favorable fees from providers, selecting cost effective providers, and creating financial incentives for providers to practice more efficiently. The policymakers are searching for ways to decrease the current levels of growth without reducing access to needed health care services.

b) Bismarck introduced mandatory sickness funds and accident insurance funds. It was firstly for workers then extended to dependent of workers. The two ways to fix the problem of risk selection is to reduce incentives and by reimbursing based on how expensive customers are expected to be. The two different ways to solve the problem of adverse selection is by disallowing the customers to choose their insurer and by restricting product differentiation.

c) A higher life expectancy with lower birth rates led to an ageing population in most developed countries. Aging populations pose a challenge to the fiscal stability of many societies through increased government spending on pension, healthcare, and social benefits programs. This may hurt economic growth and overall quality of life if governments need to divert public spending towards this. Encouraging and rewarding paid and unpaid work among the elderly could play an important role in the solution of the aging-related fiscal and social challenges. Encouraging older workers to remain longer in the labor force is often referred as the most practical solution to fiscal pressures and challenges related to population aging.


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