Final answer:
A managed care plan managed by a primary care physician is called a Health Maintenance Organization (HMO), which pays providers a flat rate per patient and aims to reduce adverse selection and overspending on unnecessary services.
Step-by-step explanation:
A type of managed care plan in which all health care must be managed by a primary care physician is known as a Health Maintenance Organization (HMO). HMOs are structured such that medical care providers receive a fixed reimbursement according to the number of patients they handle, regardless of how many services are provided.
This model encourages the allocation of resources effectively and aims to reduce unnecessary services, as the providers have the incentive to manage care without overspending since they receive a flat amount. Furthermore, adverse selection is a concern in insurance markets where knowledge about risk is imbalanced between insurance buyers and the insurer, potentially leading to high-risk individuals being more attracted to certain insurance plans due to perceived benefits.