Final answer:
Administrative costs in healthcare 1) encompass the management of financing, insurance, delivery, and payment functions. They are a major part of operational expenses for health insurance companies and apply to various healthcare systems like fee-for-service models and HMOs. The correct answer is option 1.
Step-by-step explanation:
Administrative costs refer to the expenses related to the management of the financing, insurance, delivery, and payment functions of health care. These costs encompass all aspects of running the administrative side of a healthcare business, including hiring workers, administering accounts, and processing insurance claims. In the context of healthcare, administrative costs are not limited to only financing and insurance, nor solely delivery and payment functions, but they embrace the full spectrum of non-clinical expenses necessary to facilitate healthcare services.
Health insurance companies, for example, face administrative costs as a major part of their operational expenses, which includes funds for personnel management, efficient account supervision, claim processing, and the overall management of financial transactions involving insurance premiums and payouts. Moreover, administrative costs also come into play in various healthcare systems, such as fee-for-service models and health maintenance organizations (HMOs), where the management of payments and reimbursement methods differs.
The correct answer to the question "What are administrative costs?" among the given options is: 1) Costs associated with the management of the financing, insurance, delivery, and payment functions of health care.