Health Care Financing

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Financing of Health Care Teonna Smalls HCS/440 Donna Lupinacci 05/12/2012 Introduction HMO’s and enrollees are two important players in the world of health care. Due to uncertainty on the supply and demand, moral hazard, and adverse selection, decision making for HMO’s more complex. The simulation provided me the decision making tools necessary, when making an economic decision for an HMO. Health care can be seen as a good that consumers demand and managed care firms are considered to be suppliers of both health insurance and health care. Economics tells us that rational firms make choices to maximize profits. Managed care firms incur cost when providing health care services to their enrollees and maximize their revenue by…show more content…
Outpatient services included are physician office visits, periodic physical examinations, annual well women examinations, occupational therapy, speech therapy, physical therapy, ambulance services, prescription services, durable medical equipment, diabetes management and treatment, and prenatal and postnatal care. Risk, Cost and Profitability Castor Collins calculates the premium and profitability based on the risk Castor Collins will incur when providing insurance to a particular group. The risk estimates are based on the cost of services and expected utilization by the group. Based upon the ages and health profiles of the employees at Constructit and E-Editors, Castor Collins can estimate the expected utilization per year. Comparing the average utilization to healthy adults in the same age group, we can estimate the risk involved when providing insurance to each group under various plans. The annual premium to be charged is based upon the cost and expected utilization of each service under either plan. The cost of service is exclusive of any co-payments that enrollees may bear. Plans Selected Based upon the health and utilization of services I choose the Castor Standard plan for Constructit and I decided not to ensure E-Editors. Castor Standard does not cover preexisting conditions, which means the risk of providing this plan is lower. In turn, the returns will be lower. The
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