Final answer:
Health insurance plans typically cover a portion of healthcare costs after deductibles and copayments, with coinsurance determining the shared percentage of costs. There are two main types of health insurance: public and private. Strategies like deductibles and copayments are used to reduce moral hazard and limit unnecessary healthcare usage.
Step-by-step explanation:
Understanding Health Insurance Coverage
Health insurance plans vary in coverage, but typically they include a combination of deductibles, copayments, and coinsurance. The deductible is a fixed amount you must pay before the insurance starts covering costs. Copayments are fixed fees for services, like $20 for a doctor's visit, and coinsurance, where you would pay a percentage of the costs after meeting your deductible, say 20%, with the insurer covering the remaining 80%.
There are two main types of health insurance: public healthcare, which is government-funded, and private healthcare, which is privately funded. This can include employment-based insurance offered by an employer, or direct-purchase insurance which individuals buy themselves. Part B is a branch of U.S. healthcare that represents an optional insurance covering non-hospital health care costs like physician services and medical tests, where the government subsidizes a significant portion of the costs.
To mitigate moral hazard—the tendency for insured individuals to use more healthcare services because they are insured—deductibles, copayments, and coinsurance are employed. These out-of-pocket expenses can help to reduce the demand for unnecessary medical services, as individuals will bear part of the costs.
The fundamental difference between a fee-for-service healthcare system and one based on health maintenance organizations (HMOs) is that the latter typically offers services through a network of providers for a fixed monthly fee, promoting preventive care and cost-efficiency, while the former charges for each service rendered, potentially leading to higher overall healthcare expenses.