Health Insurance and Service Utilization - Free Paper Example

Introduction

The health industry is the most crucial of all government sectors worldwide. The industry handles one of the critical elements of human survival, that is, health and well-being. Good health is a necessity, and in light of this concept, a lot of businesses rely on this sector, for instance, health insurance companies who are in the business of medical expense coverage. Insurance companies are popular because they offer minimum payment for extensive coverage of expenses through the concept of shared risks. Human nature demands recklessness when it comes to generosity; hence a patient would misuse doctor visitation because someone else will incur the cost. Healthcare providers considering they are in the profit-making business, will opt to maximize the medical coverage of their patients to increase hospital service utilization. The demand for hospital service utilization is dependent upon a patient's payment mode because, in the case of insurance coverage, the utilization rate is high.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Services and the Per Capita Rate of Utilization

Existing literature suggests that an increase in available medical services in a community increases the per capita rate of utilization of those services. Ginsburg and Koretz (1983) conducted a study on the implication of bed capacity on hospital utilization by Medicare enrollees with estimates of the "Roemer effect." Ginsburg and Koretz (1983) explained that "Roemer Law" is the conception that with an increased number of hospital beds per person, there should be an increase in utilization rates of the hospital. The law, according to Ginsburg and Koretz (1983), is essential in the capacity planning of health facilities in the bid to control construction. Ginsburg and Koretz (1983) concluded that a ten percent increase in hospital beds per person increased the utilization by four percent. The study indicated that a successful health plan that reduced bed stock by ten percent would provide an allowance for resource-saving through reduced capacity and four percent care day's reduction (Ginsburg & Koretz, 1983).

Provider Incentive for Service Utilization Increment

Healthcare providers, as the name suggests, have a primary role in preserving humanity through rendering their expertise for the curing of diseases and conditions. However, healthcare providers also exist as business entities, and the critical objective of any business is to make and maximize profit. There are different modes of covering medical costs that a patient can use for their convenience. Some of the most popular methods include the use of medical insurance. The issue of insurance brings about the concept of moral hazard, which is problematic for the insurance companies, but an incentive for healthcare providers to increase hospital services utilization. Generally, people will behave recklessly in the presence of insurance coverage as compared to when they have to cover the entire treatment cost. For instance, one could decide to pay the doctor a visit for minor symptoms because they have medical coverage. The doctors also can maximize this aspect of a patient's medical coverage and expand utilization by requesting lab tests with dubious value.

Healthcare providers can also increase hospital service utilization through the presence of FFS (Fee-for-service) plans. FFS is an insurance plan, where the provider receives a direct payment from the insurance company or requires one to file a claim for every medical expense incurred to receive reimbursement. Luft (2009) stated that the FFS system of payment encourages service delivery since every single service generates revenue. Luft (2009) explained that healthcare providers could make either a loss or profit depending on the cost of services. A physician makes an income after deducting all expenses from the revenue received (Luft, 2009). The more services one renders, the higher the profit, and hence the FFS plan serves as an excellent incentive for providers to increase hospital utilization.

Measures for Controlling Insurance Risk Phenomenon

The nature of the FFS health plan creates profits and incentives for healthcare providers to expand hospital service utilization. However, for an insurance company, that problem could cause failure. Moral hazards emanating from reckless medical spending by claimants, which also encourage doctors to increase service utilization, present trouble for health insurance entities. One viable plan I could use as an insurance executive is to engage patients in co-payment for a doctor's visit as well as set stringent rules for covering particular medical tests.

As an insurance executive, I see it best to maximize group insurance. Phelps (2018) explained that employers have the advantage of favorable tax treatment in terms of medical coverage for their employees. Folland et al. (2013) demonstrated that health insurance employer provisions provide economies of scale, considering that an employer buys insurance coverage in bulk, hence decreasing the coverage price of employees. (Folland et al., 2013). With increased hospital capacity, I might create competition among hospitals in an attempt to reduce costs. I can also opt to build networks that are tiered; hence, providing a scenario where even if I am to cover highly-priced providers, it would be at lower rates.

Potential Customer Service and Provider Relations Ramifications

In dealing with the insurance provision problems, the counter-attacks that I employ as an insurance executive are bound to attract some consequences. From the customer's perspective, the concept of co-payment for every doctor's visit will certainly not be agreeable, and Medicare and Medicaid might be an attractive options. Phelps (2018) explained that Medicaid partners with the Federal state to provide coverage for low-income earners. By Federal law, the state remains limited in terms of co-payment, which makes medical care almost free (Phelps, 2018). With the presence of coverage of such magnitude, health insurance companies could lose potential customers (Phelps, 2018). Healthcare providers could also retaliate to the concept of competition and tiered networks by forming mergers with their competitors. Some doctors could opt out of the system and make patients pay for everything. Patients would suffer the consequences but have no choice because it is the expertise of the doctor they are after and not the hospital.

Conclusion

In conclusion, service utilization in a hospital could increase due to the usage of insurance covers. Physicians tend to expand their research on patient's illnesses through tests with the presence of an insurance cover while patients behave recklessly. Insurance companies could create competition, and tiered networks, and engage patients in co-payments in an attempt to reduce costs. However, insurance companies should prepare for retaliation, where patients can shift to Medicaid as an alternative, and healthcare providers could either opt out of the coverage system make patients suffer in payment, or merge with their competitors.

References

Folland, S., Goodman, A.C., & Stano, M. (2013). The Economics of health and health care (7th ed.). Pearson.

Ginsburg, P.B., & Koretz, D.M. (1983). Bed availability and hospital utilization: Estimates of the "Roemer Effect." Health Care Finance Rev, 5(1), 87–92. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4191337/

Luft, H.S. (2009). Economic incentives to promote innovation in healthcare delivery. Clinical Orthopaedics and Related Research, 467(10), 2497–2505. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2745468/Phelps, C.E. (2018). Health economics (6th ed.). Routledge.