Final answer:
A private organization that serves to contract with Medicare for the payment of Part A and some Part B expenses is a Medicare Administrative Contractor (MAC). They facilitate the processing of claims in the Medicare fee-for-service system and address various complexities such as adverse selection in the insurance market.
Step-by-step explanation:
A private organization that contracts with Medicare to pay Part A and some Part B bills and determines payment to Part A facilities is known as a Medicare Administrative Contractor (MAC). MACs are private healthcare insurers that have a regional jurisdiction to process Medicare Part A and Part B (medical insurance) claims. They play a critical role in the Medicare fee-for-service health financing system.
Medicare Part A covers hospital charges and is funded by payroll deductions and employer contributions. Patients are responsible for deductibles and copayments. Conversely, Part B is voluntary and covers costs outside of hospital stays, like physician services and outpatient visits, with patients paying monthly fees, deductibles, and copayments.
Understanding these components of Medicare is essential, particularly with the complexity introduced by concepts like adverse selection and moral hazard in the insurance markets. Adverse selection occurs when there is an asymmetry in information between the insurance buyers and the insurance company, leading to potential imbalances in coverage uptake based on perceived risks.