Economics Issues Simulation Paper
HCS/440 – Economics: The Financing of Health Care
August 15, 2011
Ms Kathie Iaconetti
Economic Issues Simulation
The purpose of a managed care organization is to coordinate the costs and delivery of health care. A managed care organization oversees money spent on labor, technology, and facilities such as physician offices and hospitals. A type of managed care organization is a Health Maintenance Organization (HMO). A HMO “provides medical care for all its enrollees in return for a fixed annual fee per enrollee” (University of Phoenix, 2010, Key Terms and Concepts Section). An HMO tightly oversees the use of health care services thereby reducing costs and controlling utilization. For example, HMO’s reduce costs and control utilization among services are by requiring second opinions, performing pre – admission testing and reviews for continued stays or additional procedures, and allowing generic substitutions for drugs. Managed care organizations can save money by providing lower prices through contracting large volumes of services and reducing the amount of hospitalizations (Getzen & Allen, 2011). This essay presents a scenario in which I am a representative of Castor Collins Health Plans responsible for maximizing profits and minimizing risks. Within my job description, I am advised to develop a comprehensive health insurance plan for two entities: ConstructIt and E – Editors. This essay explains the company’s employee demographics, health risk factors, premium amount the company is willing to pay, and what company I chose to offer a health insurance plan. Based upon my analysis of potential utilization, I will provide two reasons for why each plan could be selected as well as explain my reasoning for choosing the plan. Last, I will explain why I did not offer the company a different plan.
ConstructIt Employee Profile
ConstructIt is a construction company composed of 1,000 employees. ConstructIt is [Avoid "it is," etc.] comprised of 550 men and 450 women between the ages of 26 – 42 with 60% having spouses. ConstructIt employees work profile consist of 32% great physical activity, 25% moderate physical activity, and 43% sedentary activities. The age and gender profile of ConstructIt is as follows: Almost half of the population is between the ages of 26 – 30 years One – third of the population is between the ages of 31 – 35 years Approximately 20% of the population is between the ages of 36 – 40 years Less than 10% ages 41 – 45 years. (University of Phoenix, 2010, Health Profile Section) The health profile of major risk factors among ConstructIt employees is depicted within the following table: Obesity
High Blood Pressure
Thirty – eight percent of the population is diagnosed as having no major health risks.
Economic Issues Simulation
In addition, a combined 18% of the population smokes (University of Phoenix, 2010, Major Health Risks Section). ConstrucIt has a high number of people diagnosed as not having any major health risks. This is good because it means fewer people will seek health care services resulting in saving money for Castor Collins Health Plans. However, ConstructIt does have a high incidence of obesity rates: 39% of the group. Obesity predisposes a person to developing other serious chronic ailments such as high blood pressure, high cholesterol, and diabetes. The high rate of obese individuals may increase the risks involved whenever offering health insurance to ConstructIt. Chosen Company and Plan
ConstructIt is willing to pay a maximum premium payout of $4000 per enrollee and E – Editors is willing to pay $4500 per enrollee. However, E – Editors has 600 more employees than ConstructIt, which in turn increases costs and utilization rates. Based upon the health profile of ConstructIt versus E – Editor I have...
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