Answer :
Empirical studies that suggest differences in utilization rates between fee-for-service and managed care plans are unable to differentiate between the impacts due to financial incentives and those due to clinical rules.
Give a brief account on fee-for-service.
Services are unbundled and paid for separately under the fee-for-service (FFS) payment model. Because payment is based on the quantity of care provided rather than the quality of care, it encourages doctors to offer more treatments in the healthcare system. FFS has been shown to be effective in raising healthcare quality, but there is conflicting evidence to support either success or failure of these systems. Similar to this, patients are motivated to accept any medical therapy that might be beneficial when they are shielded from paying (cost-sharing) by health insurance coverage. Fee-for-service billing drives up expenses and undermines the cost-savings of integrated care. To lessen its effect, a number of reform initiatives have been tried, suggested, or started (such as moving towards bundled payments and capitation).
In capitation, doctors are not encouraged to conduct procedures, even those that are required because they are not compensated more for doing so. In the US, FFS is the most common form of physician payment. FFS is combined with a national price-setting mechanism (all-payer rate setting) in the Japanese healthcare system to reduce costs.
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