Final answer:
Medically necessary services are determined by healthcare insurers, with providers in HMOs receiving fixed reimbursements that motivate them to allocate resources efficiently. Adverse selection in insurance markets affects service accessibility, leading to the challenge of balancing necessary care and cost control.
Step-by-step explanation:
Services are denied when they do not meet medically necessary parameters as determined by healthcare insurers, who follow specific criteria to assess the necessity and appropriateness of care. In systems like health maintenance organizations (HMOs), providers receive a fixed reimbursement per patient, incentivizing them to avoid unnecessary treatments that do not contribute to improved patient outcomes. Hospitals facing a high volume of uninsured patients may encounter financial strain, as they are required by federal law to provide emergency medical care regardless of the patient’s ability to pay, leading to a higher economic burden on these facilities.
Facing issues like adverse selection, insurance markets struggle with higher-risk parties being more likely to purchase insurance perceived as beneficial, while lower-risk parties may avoid higher-cost options. This dynamic can alter the allocation of healthcare resources and impact the accessibility of services for different populations. Furthermore, the shift towards a mix of managed care and fee-for-service models attempts to balance the provision of necessary care while limiting overutilization and controlling costs.