Final answer:
Medicare uses reimbursement structures based on HMOs to reduce hospital reimbursements by providing fixed payments per patient, encouraging efficient and necessary care to limit moral hazard and adverse selection.
Step-by-step explanation:
An indicator utilized by Medicare to potentially reduce reimbursement to hospitals is tied to the incentive structure within healthcare financing, particularly a shift from a fee-for-service model to health maintenance organizations (HMOs). Under HMOs, providers are paid a fixed amount per patient, giving them incentives to provide efficient care to avoid unnecessary procedures that could incur additional costs. This model seeks to balance the quality of care with cost-effectivenessts to address issues of moral hazard and adverse selection.