Final answer:
A Health Maintenance Organization (HMO) is a type of Medicare policy with restricted network provisions, where insureds are required to use specified healthcare providers. Unlike fee-for-service systems, HMOs pay providers a fixed amount per member, incentivizing cost-effective, preventative care to avoid higher costs from unnecessary services.
Step-by-step explanation:
The type of Medicare policy that requires insureds to use specific healthcare providers and hospitals, hence has restricted network provisions, is a Health Maintenance Organization (HMO). An HMO offers a range of healthcare services through a network of providers who agree to supply services to members. Unlike traditional fee-for-service insurance where providers receive reimbursement for each service provided, HMOs pay a fixed amount per member, which creates an incentive for healthcare providers to focus on preventative care and cost-effective treatment to avoid unnecessary services that could incur higher costs later.
Adverse selection is a challenge that arises when insurance buyers have more knowledge about their health risks than the insurance company. This can lead to higher-risk individuals purchasing insurance, therefore increasing costs for the insurer. To mitigate issues like moral hazard and adverse selection, healthcare providers may be compensated with a mix of managed care and fee-for-service arrangements.
Medicare Part A covers hospital charges and is funded through payroll deductions and employer contributions. Beneficiaries are responsible for deductibles and copayments for certain services and there are no limits on the total costs one can incur.