Question

A successful example of test of supplier-induced demand and its conclusion

Randomly assigned pediatric resident physicians to receive fee-for-service or salary payment; those paid a fee for service scheduled more visits per patient and saw their patients more often

Answer 1

The question examines how fee-for-service and HMO health financing systems incentivize medical providers differently, highlighting a study that indicates fee-for-service may induce more frequent patient visits.

Step-by-step explanation:

The question pertains to a health financing system known as fee-for-service, where medical care providers are reimbursed for every service they perform. An alternative approach to this system is the health maintenance organization (HMO) model, wherein providers are paid a fixed amount per patient, altering the incentive structure. The original study mentioned tests for supplier-induced demand, demonstrating that pediatricians on a fee-for-service plan scheduled more visits, implying an incentive to offer more services. Meanwhile, challenges such as adverse selection and moral hazard in health insurance markets are significant concerns in designing effective health care payment models.