Analysts believe that although the medical arms race may have led to quality competition in the 1980s _____ has led to more price competition since the 1990s.
a. selective contracting through managed care
b. prospective payment
c. economies of scale
d. Answers (a) and (b) are correct
Thanks and Good Night
To determine the answer to this question, we need to understand what the term "medical arms race" means and how it relates to quality and price competition in the healthcare industry.
In the 1980s, the term "medical arms race" referred to the trend of hospitals and healthcare providers investing heavily in expensive medical technology and facilities to attract patients and maintain a competitive edge. While this arms race led to improvements in the quality of medical services and technologies, it also resulted in higher healthcare costs.
Now let's consider the options provided:
a. Selective contracting through managed care: Managed care refers to a system in which healthcare providers negotiate contracts with insurance companies to provide medical services to their members. Selective contracting involves insurance companies carefully selecting which providers to include in their networks based on factors like cost and quality. This approach emphasizes cost containment and negotiating lower prices with healthcare providers.
b. Prospective payment: Prospective payment is a payment system used in healthcare where fixed rates are established for specific services or treatments in advance. This system is typically used by government programs like Medicare. It aims to control costs by setting predetermined payment amounts, regardless of the actual costs incurred by the provider.
c. Economies of scale: This refers to the cost advantages that result from increased production or scale of operations. It implies that as a business expands and produces more, its average costs decrease. While economies of scale may lead to lower costs in the healthcare industry, it is not directly related to the medical arms race or price competition in this context.
Given the explanations above, the correct answer to the question is (d) Answers (a) and (b) are correct. Both selective contracting through managed care and prospective payment have contributed to more price competition since the 1990s in response to the medical arms race. These strategies have focused on controlling costs and negotiating lower prices, thereby encouraging price competition among healthcare providers.
I hope this helps! If you have any more questions, feel free to ask. Good night and take care!