Map of Lizard Island on Some payers have tried to solve the principal-agent problem by giving the physician a fixed per-patient (or capitated) payment, in most cases based on patient health status. A physician is allowed to keep whatever amount is left after treating the patient; this pay structure can align the incentives of the physician with those of the payer. MORAL HAZARD is another complication in healthcare markets. Insured patients do not bear the full financial cost of medical care, which creates an incentive for patients to invest less in avoiding illness, and to consume more medical care, than is socially optimal. The socially optimal consumption of medical care occurs when the marginal social benefits of consumption equal the marginal social costs. The complication is that with insurance, patients’ out-of-pocket costs are often far less than the marginal social costs, and as a result, patients have an incentive to consume an amount greater than is socially optimal. Insurers seek to restrain such moral hazard by covering only health care expenditures beyond some large initial deductible, and/or by requiring patients to pay a certain amount, called a co-payment, for each covered good or service consumed. Map of Lizard Island 2016.
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Map of Lizard Island Holiday Map Q.