Understanding Different Types of Insurance Plans

What is an insurance plan that pays physicians on the basis of their charges called?

a) a diagnosis-related group (DRG) plan
b) a health maintenance organization (HMO) plan
c) a capitation plan
d) a fee-for-service (FFS) plan

Answer:

An insurance plan that pays physicians on the basis of their charges is called a fee-for-service (FFS) plan.

A fee-for-service (FFS) plan is a type of insurance plan where physicians are paid for each individual service they provide, rather than receiving a set amount of money for each patient they see. This means that physicians have an incentive to provide more services to increase their income, which can sometimes lead to unnecessary treatments and exams.

Fee-for-service plans have faced criticism for contributing to the rising costs of healthcare and the overuse of medical services. In response to these issues, alternative payment models such as capitation plans and diagnosis-related group (DRG) plans have been developed.

Capitation plans involve paying physicians a fixed amount per patient, regardless of the number of services provided. On the other hand, DRG plans pay a set amount for a specific condition or treatment, encouraging efficiency and cost-effectiveness in healthcare delivery.

Despite the criticisms, fee-for-service plans remain popular in the United States, especially among those with private insurance coverage. It is essential for patients to be aware of the type of insurance plan they have in order to make informed decisions about their healthcare and avoid unnecessary medical expenses.