Question

Utilization management is the evaluation of the medical necessity, appropriateness, and efficiency of the use of healthcare services, procedures, and facilities under the provisions of the applicable health benefits plan.

A. True
B. False

Answer 1

Utilization management evaluates the necessity and efficiency of healthcare services within a health plan, which is true. It is important in both fee-for-service and HMO systems to manage healthcare delivery and costs effectively.

Step-by-step explanation:

Utilization management is the evaluation of the medical necessity, appropriateness, and efficiency of the use of healthcare services, procedures, and facilities under the provisions of the applicable health benefits plan, which is true. In a fee-for-service system, providers are compensated based on the services they render. In contrast, health maintenance organizations (HMOs) reimburse providers based on patient enrolment numbers, influencing providers to manage resources effectively to prevent overutilization and underutilization of healthcare services. This model aims to counteract adverse selection and moral hazard which can happen when the asymmetry of information exists between the insurer and insured or when the payment structure incentivizes unnecessary care.