Explain why insurance companies, whose owners are presumably risk averse, are nonetheless willing to take on someone else’s risks of medical…

1. Explain why insurance companies, whose owners are presumably risk averse, are nonetheless willing to take on someone else’s risks of medical spending by selling insurance.2. Explain the incentive problem associated with fee-for-service insurance reimbursement. How does switching to capitation reimbursement solve this problem? Can you make an argument that capitation creates a different incentive problem?3. Discuss the differences between a traditional staff model HMO managed care plan and a PPO managed care plan. Also explain the differences between a POS managed care plan and an IPA managed care plan.4. In class we discussed eight ways how managed care organization “manages care” (e.g. gatekeeper, copayments…etc.). Discuss three of these ways.5. Explain two possible reasons why managed care would harm health outcomes.6. Describe the Medicare Prospective Payment System. What incentive problem was it designed to correct? What other incentive problem did it create?7. Explain how public insurances such as Medicaid and SCHIP “crowd-out” private insurance. Why is it an issue?