Chapter_10_v2 - Part 3 Public Expenditure Social Insurance...

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Part 3 – Public Expenditure: Social Insurance and Income Maintenance Chapter 10 – Government and the Market for Health Care 1. One explanation discussed in the chapter is that the shift toward managed care led to a one-time decrease in expenditures, but advances in medical technology continued, resulting in concomitant growth in expenditures. This explanation implies that HMOs helped prevent rising health care costs during the 1990s, but have been unable to keep costs low due to rapid advances in technology. The structure of HMOs creates incentives for health care providers to skimp on the quality of care. HMOs used “gag rules” that prohibited physicians from discussing treatment options that were not covered by the plan, but government regulation has since banned these gag rules, allowing patients greater access to information. Medical technology creates new, and often more expensive, treatment options, which many patients believe they should have. It has become increasingly difficult for HMOs to keep costs down by denying more expensive treatment options, especially since they can no longer prevent physicians from informing patients of these options. 2. Increasing the price of medical care should improve the efficiency of health care slightly. Once people begin to pay for the care they receive, they will reduce their use of care, increasing efficiency. The cost to the consumer will come closer, by a small amount, to the actual cost of the care, making their decisions more efficient. 3.
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Chapter_10_v2 - Part 3 Public Expenditure Social Insurance...

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