Final answer:
In a fee-for-service health financing system, medical care providers receive reimbursement according to the cost of services they provide. Health maintenance organizations (HMOs), on the other hand, reimburse providers based on the number of patients they handle. Both methods have their own advantages and disadvantages.
Step-by-step explanation:
In a fee-for-service health financing system, medical care providers receive reimbursement according to the cost of services they provide. This means that doctors are paid for each service they perform. For example, if a doctor performs a surgery, they will receive payment for that procedure. This payment method creates an incentive for doctors to provide more services, which can lead to unnecessary medical spending. On the other hand, health maintenance organizations (HMOs) reimburse providers based on the number of patients they handle. This encourages providers to allocate resources efficiently between patients who receive more or fewer health care services.
Fee-for-service is a traditional method of provider reimbursement, while HMOs represent a newer trend. Both methods have their own advantages and disadvantages, and the choice between them varies depending on the specific healthcare system and goals.