Summary: Difference between Adverse Selection and Moral Hazard •Moral hazard –When behavior changes as a result of being insulated from risk or true economic costs. Moral hazard arises because the economic actor does not bear the full consequences of its actions. •Adverse selection - a market process in which bad results occur due to information asymmetries between buyers and sellers.
Outline How can health insurance be designed to better control costs? 1.Decrease quantity of services •Provider payment •Utilization Management 2.Decrease price of services What are the different types of health insurance designs? http://www.polleverywhere.com/multiple_choice_polls/OTMzNjI5ODY3 http://www.polleverywhere.com/multiple_choice_polls/LTIwNjU1MjMwNDE
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Schematic on What a Health Insurer Does Health Insurer Providers: - MDs - hospitals Enrollee/ Patient Employer Pay a premium regardless of whether a person receives any medical care Cost sharing if/when patient receives medical care Pay providers when enrollees receive care -determine how & how much to pay providers - “manage”the medical care provided - determine which providers to include in the network