HCMG LATEST QUESTIONS AND ANSWERS UPDATE: A
MASTERING A+ MATERIAL!
Why does the US spend so much on healthcare compared to other countries?
The US spends more due to higher prices for medical services and drugs, not because of higher
utilization
How do health behaviors like obesity & smoking impact health care spending in the US?
Poor health behaviors like obesity and smoking increase the need for health care services,
which raises overall spending
What is the fee-for-service (FFS) payment model?
Providers are paid for each service they provide, which can incentivize over utilization of service
What is induced demand in the context of fee-for-service?
Induced demand occurs when providers recommend more services than necessary because
they benefit financially from each service rendered.
Define credence goods
Goods or services in which consumers do not know what they need. This is an asymmetry
problem
How does the FFS model contribute to higher health care costs?
It encourages overuse of health care services since providers are paid per service, regardless of
the necessity or outcome
Who is eligible for Medicaid under the ACA expansion?
Individuals with an income up to 138% of the federal poverty level (FPL) are eligible
What were the 5 eligibility categories for medicaid pre ACA?
1. Low income children
2. People with disabilities
3. Pregnant women
4. Parents with dependent children
5. elderly people with SSI
*Note childless adults were excluded and income limits were very restrictive
What are the two models of Medicaid delivery?
, 1. Fee-for-Service
2. Managed Care Organization (MCO)
What is are Managed Care Organizations (MCOs)?
Private insurers receive a fixed amount per enrollee, and they assume the risk of covering
medical costs. MCOs are popular among Medicare and Medicaid.
What are the benefits of MCOs?
They allow for more cost control and reduce the unpredictability of fee-for-service models
How is Medicaid Financed?
Federal-state partnership. The federal government provides matching funds to states based on
their income level
List and describe the 4 parts of Medicare
1. Part A: covers inpatient hospital stays and skilled nursing care
2. Part B: covers outpatient care and physician services
3. Part C (Medicare Advantage): private health option
5. Part D: Prescription Drug coverage
Describe how Parts A-C of Medicare are financed
1. Part A: federal payroll taxes
2. Part B: taxes and premiums paid by beneficiaries
3. Part C: Medicare pays private insurers a fixed fee per enrollee and the insurer assumes the
risk of covering medical costs
Describe Medigap
Supplemental private health insurance for Medicare enrollees designed to cover some out-of-
pocket costs not covered by Medicare Part A and B.
What are some benefits of Medigap?
It limits out-of-pocket costs and offers more predictable health care expenses
True or False: An elderly person can have both Medicare Advantage and Medigap?
False; enrollees cannot have both
What did the inflation Reduction Act (IRA) bring to Medicare Part D?
The IRA eliminated the 5% coinsurance for catastrophic coverage in 2024. It added an out-of-
pocket cap $2,000 in 2025, and indexed annually for inflation after that. It also gave Medicare
the ability to negotiate prices on certain high-cost drugs
MASTERING A+ MATERIAL!
Why does the US spend so much on healthcare compared to other countries?
The US spends more due to higher prices for medical services and drugs, not because of higher
utilization
How do health behaviors like obesity & smoking impact health care spending in the US?
Poor health behaviors like obesity and smoking increase the need for health care services,
which raises overall spending
What is the fee-for-service (FFS) payment model?
Providers are paid for each service they provide, which can incentivize over utilization of service
What is induced demand in the context of fee-for-service?
Induced demand occurs when providers recommend more services than necessary because
they benefit financially from each service rendered.
Define credence goods
Goods or services in which consumers do not know what they need. This is an asymmetry
problem
How does the FFS model contribute to higher health care costs?
It encourages overuse of health care services since providers are paid per service, regardless of
the necessity or outcome
Who is eligible for Medicaid under the ACA expansion?
Individuals with an income up to 138% of the federal poverty level (FPL) are eligible
What were the 5 eligibility categories for medicaid pre ACA?
1. Low income children
2. People with disabilities
3. Pregnant women
4. Parents with dependent children
5. elderly people with SSI
*Note childless adults were excluded and income limits were very restrictive
What are the two models of Medicaid delivery?
, 1. Fee-for-Service
2. Managed Care Organization (MCO)
What is are Managed Care Organizations (MCOs)?
Private insurers receive a fixed amount per enrollee, and they assume the risk of covering
medical costs. MCOs are popular among Medicare and Medicaid.
What are the benefits of MCOs?
They allow for more cost control and reduce the unpredictability of fee-for-service models
How is Medicaid Financed?
Federal-state partnership. The federal government provides matching funds to states based on
their income level
List and describe the 4 parts of Medicare
1. Part A: covers inpatient hospital stays and skilled nursing care
2. Part B: covers outpatient care and physician services
3. Part C (Medicare Advantage): private health option
5. Part D: Prescription Drug coverage
Describe how Parts A-C of Medicare are financed
1. Part A: federal payroll taxes
2. Part B: taxes and premiums paid by beneficiaries
3. Part C: Medicare pays private insurers a fixed fee per enrollee and the insurer assumes the
risk of covering medical costs
Describe Medigap
Supplemental private health insurance for Medicare enrollees designed to cover some out-of-
pocket costs not covered by Medicare Part A and B.
What are some benefits of Medigap?
It limits out-of-pocket costs and offers more predictable health care expenses
True or False: An elderly person can have both Medicare Advantage and Medigap?
False; enrollees cannot have both
What did the inflation Reduction Act (IRA) bring to Medicare Part D?
The IRA eliminated the 5% coinsurance for catastrophic coverage in 2024. It added an out-of-
pocket cap $2,000 in 2025, and indexed annually for inflation after that. It also gave Medicare
the ability to negotiate prices on certain high-cost drugs
