Question

What is the key difference between a fee-for-service healthcare system and a system based on health maintenance organizations?

Short answer

The main distinction between the two systems is that one is based on payment based on the services supplied, while the other is based on a fixed payment for all services provided.

Step-by-step solution

Concept of HMO.

A health maintenance association (HMO) could be a health coverage company that has healthcare for a hard and fast yearly cost within the USA. it's a corporation that gives and manages healthcare facilities for medical insurance, self-funded health care benefits packages, consumers, and other groups on a paid basis by serving as a contact between health care providers.

Explanation of solution.

Moral hazards may be a major concern for insurance companies. financial loss is reduced by employing a fee-for-service healthcare system or a health-maintenance organization system.

In a fee-for-service healthcare system, healthcare service providers are compensated for the services they provide or are permitted to supply, and they are compensated more for any extra services they provide.

Service providers, on the opposite hand, will receive a hard and fast sum per person irrespective of the number of services they perform under a health maintenance organization. The policyholder has the choice of requesting additional services without incurring from now on costs.

However, in recent years, all healthcare providers should adhere to the HMO framework.

As a result, fee-for-service depends on the number of services delivered, whereas HMO relies on one payment per individual for all treatments.