Final answer:
The key difference between a fee-for-service healthcare system and a system based on health maintenance organizations (HMOs) is the way providers are reimbursed for their services.
Step-by-step explanation:
The key difference between a fee-for-service healthcare system and a system based on health maintenance organizations (HMOs) is the way providers are reimbursed for their services.
In a fee-for-service system, healthcare providers are paid for the individual services they provide. This means that providers have an incentive to offer more services to patients in order to earn more money.
On the other hand, in an HMO system, healthcare providers are paid a fixed amount per person enrolled in the plan, regardless of the number of services provided. In this case, providers have an incentive to limit the quantity of care provided.
For example, in a fee-for-service system, a doctor might order additional tests or procedures because they will be paid for each one. However, in an HMO system, the doctor would be paid the same amount regardless of how many tests or procedures are performed. This creates an incentive for the doctor to be more selective about which tests or procedures are necessary, in order to keep costs down.