Health Insurance Issues

1.Would an HMO entering the Medicare market expect to experience favorable or adverse selection? Would the magnitude of the selection bias be larger or smaller for an HMO is entering the commercial employee benefits market? The Medicaid markets?

In accordance with the historical understanding, the HMO has experienced a favorable selection in the Medicare market. It is the type of program which is overpaid by the Medicare program, and it based its payments on the average costs of treating the Medicare patients for free. The Programs experience is to transform as the aging discern the merits and lower payments of the better reportage of the drugs

In order to make the best choice of a favorable HMO selection in Medicare, there are two main reasons which should be taken into consideration. They comprise of omission from the payment formula which results in an overpayment of the Medicare contractors, and the predicted lower exploitation. In the prepaid periods during 1997, the favorable HMO means that its enrollees have incurred a low FFS cost as compared to the average of the FFS reimbursement. This thus makes the American Association of Poison Control Centers (AAPCC) overpay the HMO, Medicare savings less than the intended 5%, hence leading to additional costs(Riley, Lubitz & Rabey, 1991).The overpayment estimate ranges between 50% to 74% (Brown et, al., 1993; Langwell &Hadley., 1989). During the post -BBA period, the effect of the favorable HMO selection varied depending on the countrys payment structures. Generally, it has been predicted that the favorable HMO selection would continually cause the HMOs overpayments (Medicare Payment Advisory Commission, 2001).

It is prudent to determine that an introduction of the HMOs in the market tends to cause adverse selection problems especially in the Medigap markets. It is due to the fact that it is attractive, functional and more feasible to enter the market with higher premiums (Medigap premiums).The adverse selection problems can cause a reduction in the claims standards in the Medigap strategies. However, the greater effect is more prevalent on the Medigap type A and B plan as compared to other plans. It is thus a version which gives individuals an opportunity, ability and willingness to share the insurance costs or risks (Morrissey, 2007; Desmond, Rice & Fox, 2007).In numerous markets, the Medicaid recipients will adopt the managed care purposely to have a means of having access to the willing service provider so long as the inopportuneness of the restraint on the benefactor panel is not too hefty. In certain locales, Medicaid managed care puts a lot of emphasis on the non-elderly beneficiaries which tend to create the biased selection automatically. It is due to the fact that the Medicaid expenditure is mainly for the elderly who reside in the nursing homes.

According to research, it has been evident that the HMOs which enter the commercial market tend to face a less selection bias since the employers create the extensive price incentives which enable them to make a choice about the managed care options. These thus tend to draw more of the representative samples. The extrapolation which apprehends the selection bias in the Medicaid is predisposed mostly by the local market conditions which the Medicaid patients can have in case of the nonexistence of a managed care program. The selection bias is mainly based on the expectation of the delivery system and the type of coverage. It charges more premiums for the health insurance, especially to those who are ill quite often. Therefore, it is probable that they will choose the FFS system. Besides, most individuals who choose to purchase the healthcare insurance make such decisions since they are fairly healthy. However, it is not easy to identify. In the study done by Getzen (2010), there is a random aspect of the manner in which the utilization of the health care. However, in real usage, it can still be evident that there is acceptable and persistence in the utilization. It can thus be evident that the selection biases mainly endure in the HMO situations.

2. What incentives does a capitated physician have to keep his patients happy? What incentive does an FFS physician have? If Mr. Jones is a cranky old man, who smokes and drinks so much that his liver and other organs are going downhill, which payment system provides more incentive to keep Mr. Jones satisfied? Which provides the most incentive to render extra care? Which provides the most incentive to make sure that the level of care is optimized?

There are various parties which play a vital role in structuring the financial incentives, their effects on patients and how they influence the physicians actions. There are four main parties which can be evident ( Jensen, Morrissey, Gaffney and Liston,1997).They comprise of the individual enrollees who contract with the health plans( Hillman,Emmons,1997), the purchasers which comprise of the public programs such as Medicare and Medicaid as well as the employers and the customers who use the information at their disposal to choose the best alternative of the healthcare insurance ( Hillman,1987).Also, there are regulators who define the rules which comprise of the type of the health product and plan to be offered, and to determine the ability to access, their quality and standards of the health plans and other strategies which should be met by the health providers. Besides, health providers are responsible for delivering the health care throughout the health plan Networks (Annual Report to the Congress, 1997).

The income of the capitated physicians directly depends on the number of the patients who are enrolled in the program as well as the ability to keep the patients joyous. Every service provided in the capitatal system is considered to be a supposition from the short run income. However, the physicians must trade off the long run versus the short run effect of the perceived service quality. Other physicians like the FFS fully depend on the volume of service as opposed to the number of patients. Therefore, unlike the capitated physicians, the FFS physicians income increases as the number of services increases either in the long or short run.

In certain occasions, the capitated physicians view the patients as a liability. For instance, when Mr. Jones, who have several conditions and require treatment was viewed to be a liability unless the payment is generosity or the patient has a high network of those who can be enrolled in the physician's practice. These are opposed to the practice of the FFS physicians who get satisfaction from the quality and volume of the service provided. Therefore, achieving the optimum health care is not a straightforward path. However, some studies revealed that it could only be attained when the physicians get relatively high salaries so that the income is not pegged on the volume of the patients nor the service provided in the hospitals. However, some measures should be incorporated to enhance competency and productivity.

In summary, the incentives and finances, which are utilized by the managed care organization tend to inspire the health care providers to be subtle to the whole populace they serve. They should be more concerned about the outcome of the services which the population acquires and respond to the feedback promptly. Due to the rapid changes in the strategies to match the intensity of care with the patients needs, tastes, and preferences, there is a need for the physicians to be granted an opportunity, take responsibility and influence the managed care to guarantee that the patients' interests are given priority.

References

Annual Report to Congress Washington DC (1997). Physician Payment Review Commission

Brown RS, Langwell K. (1988) Enrollment Patterns in Medicare HMOs: Implications for Access to Care. Advances in Health Economics and Health Services Research ; 9:69-96.

Desmond, Katherine A., Thomas Rice, and Peter D. Fox, ( 2006). Does Greater Medicare HMO Enrollment Cause Adverse Selection into Medigap? Health Econ., Policy and Law 1 (1): 3-21.

Hillman AL (1987). Financial incentives for physicians in HMOs: is there a conflict of interest? N Engl J Med. 317:1743-8.

Jensen G, Morrisey M, Gaffney S, Liston DK, (1997). The new dominance of managed care: insurance trends in the 1990s. Health Aff (Millwood).16(1):125-36.

Langwell KM, Hadley JP(1989). Evaluation of the Medicare Competition Demonstrations. Health Care Financing Review. 11(2):65-79.

Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment

Morrissey, M.A. (2007). Health insurance. Chicago, IL; Health Administration Press

Policy. Washington, DC, (2001). Medicare Payment Advisory Commission.

Riley G, Lubitz J, Rabey E, (1991) Enrollee Health Status under Medicare Risk Contracts: An Analysis of Mortality Rates. Health Services Research, 26(2):137-63

Simon C, Emmons DW, (1997). Physician earnings at risk: an examination of capitated contracts. Health Aff (Millwood), 16(3):120-6.