D1. List and explain three methods that managed care companies try to reduce their costs. For...

D1. List and explain three methods that managed care companies try to reduce their costs. For each method, do you think that this reduces moral hazard (that is, excessive usage), or that it reduces quality, or both?

D2. Why do you suppose that people do not enter into their own pooling arrangements, given that the insurance company can charge hefty loading costs?

Expert Solution

D1. Methods of COST REDUCTION are as follows;

# FINANCIAL MANAGEMENT : With the increasing difficulty in procuring finance, Management should eliminate useless investment. For this, it must critically examine the amount of working capital and fixed capital needed and the Financial conveniences of reducing them.Wasteful use of capital is as bad as inadequate capital. Over and Under Capitalisation are both bad signals. Therefore, Capital should be procured at economical cost and it should be economically used for getting maximum return. Moreover, this Financial Management does not reduces Moral Hazard and Quality of the product.

# ADMINISTRATION : Proper and Systematic Administration is another method of Cost Reduction. In this, Office should be re- organised if there is a scope for improvement in the efficiency of persons engaged in the office.Efforts should be made to reduce the expenses on telephone, lighting and travelling but not at the cost of efficiency. This method of cost reduction also not reduces the Moral Hazard and Product Quality.

# PRODUCTION PLAN, PROGRAMME and METHODS: Production control ensures proper planning of work by installing an efficient procedure and programme of materials ordering and proper utilisation of material and resources so that there is no waste of time and money due to waste of components, men, materials etc. This cost reduction method does not reduces the moral hazard and quality of product.

D2. People do not suppose to enter into their own Pooling arrangements even when Insurance company charges Hefty Loading costs because People are not in a position to bear that much risk associated in it. They found it would be beneficial for them to pay costs to insurance companies and transfers the risk. Risk pooling is essential to the concept of Insurance. It refers to the spreading of financial risks even among a large number of contributors to the program. Thus, People prefers to not enter into their own pooling arrangements.

Rahul Sunny answered 2 years ago

Describe the approach used by managed care to reduce health care costs. Has it been affective...

Describe the approach used by managed care to reduce health care costs. Has it been affective at reducing costs? Has it reduced the percentage of GDP spent on medicine?

How are prescription costs “managed” by insurance companies?

Managed care plans tend to lower health care costs, yet the level and growth of managed...

Managed care plans tend to lower health care costs, yet the level and growth of managed care premiums are similar to those of traditional fee-for-service insurance plans. How can that be explained?

List the three reasons Medicaid enrolled members in managed care plans. (3-7 sentences)

List 4 ways managed care organizations attempt to control costs AND select one of your answers...

List 4 ways managed care organizations attempt to control costs AND select one of your answers to elaborate on HOW that way controls costs.

Why and how can companies reduce their fixed costs or switch them to variable costs? Explain...

Why and how can companies reduce their fixed costs or switch them to variable costs? Explain the advantages and disadvantages of high-fixed and low-fixed costs.

List and briefly explain the three basic appraisal methods

Your friend believes that the government should not try to reduce the pollution amount in companies....

Your friend believes that the government should not try to reduce the pollution amount in companies. He believes every single environmental regulation is bad. Write a response (5-8 sentences) about why it is socially efficient for there to be efforts to reduce pollution. (Make sure to use some economic terms in your response).

List and explain three methods of predicting prepayments on a pool of mortgages.

Explain the differences between traditional indemnity insurance and managed health care. Should insurance companies dictate reimbursement...

Explain the differences between traditional indemnity insurance and managed health care. Should insurance companies dictate reimbursement rates for various medical tests and procedures in an attempt to keep prices down?

Question