2. 1. Out-of-pocket
◦ Taking out from your own wallet and paying for the
health goods and services that you utilize.
◦ Most dominant mode of private health financing in
our country.
◦ ADVANTAGE:
 Individual spends money only when he or she gets
sick.
 Individual does not spend anything at all if he or she
does not get sick.

3. ◦ DISADVANTAGE
 Individual may encounter problems in securing
finances or suffer from financial distress when he/she
becomes seriously sick

4. ◦ Insurance plans are bought by individuals for
themselves or their families.
◦ Can be bought by employers as medical benefits for
their employees.
◦ Individual pays an annual premium, in turn the
company guarantees to cover his/her hospital
expenses up to a certain limit for a period of 1 yr
◦ “Give me your money now, and I will pay for your
hospitalization needs if you get seriously sick
requiring hospitalization, within a period of 1 yr.”

5. ◦ ADVANTAGE:
 Individual pays a relatively small amount to be assured
or relatively big hospitalization covergae within a
period of 1 yr.
◦ DISADVANTAGE:
 Individual who does not get seriously sick requiring
hospitalization within the coverage period is not able
to avail of or utilize health services.

6. MEDICAL INSURANCE GOVERNME
SPECIALIST COMPANY NT
HOSPITALS
GENERAL
PHYSICIANS
CONSUMER
PRIVATE
HOSPITALS
PHARMACY
LABORATORY

7.  Patient would choose to utilize the more
expensive alternative. Goods will be very cheap
since the 3rd party will be paying part of the
goods/services
 Insurance company also participates by paying
health service utilization.
◦ Puts the insurance company in difficult situation because
all they do is pay the utilized health goods and services.
 INSURANCE HAZARDS
 Causes bloating of medical expenses for insurance
companies and can bring about bankruptcy to such
companies.

8.  Hazards
◦ Events or phenomena which happen in insurance
setups, brought about by poor control of health
service utilization

9.  CONSUMER-INITIATED MORAL HAZARDS
◦ Emanates from consumers.
◦ Tendency for members to used inappropriate and
expensive health services given that a 3rd party
shoulders part or whole of the expenses, making it
relatively cheap for the one utilizing it.
 PROVIDER-INITIATED MORAL HAZARDS
◦ Emanates from providers like hospitals and medical
practitioners.
◦ Tendency for providers to charge prices beyond what
might be considered as fair compensation for services
rendered, given that those insured become less sensitive
to prices (3rd party pays the price)

10.  ADVERSE SELECTION
◦ Emanates from the insurance program itself
◦ Tendency for members who are less likely to use
program benefits not to enroll and remit
contributions leaving a pool of high-risk member
population
◦ When an insurance holder is not able to use the
insurance benefits after several years of paying the
insurance premium, there is greater chance that the
person will discontinue his insurance plan.

11. ◦ Offshoot of health insurance
◦ Control the medical utilization problem among insurance companies.
◦ Have control over the use of healthcare benefits and are able to make
utilization of health goods and services more cost-effective.
◦ Consumers pays a premium which will give him a comprehensive health
care program thru a “package of benefits”
◦ Not merely a hospitalization coverage but a complete preventive, curative
and rehab package.
◦ “Give me your money now, and I will take care of your health for a period
of 1 yr.”
◦ Difference from insurance companies =HMOs prevent plan holders from
having direct links with the providers in hospitals and clinics

12. Medical
Specialist
HMOs
General Practice
Medical claims: Physician
CONSUMER “Actuarial risk”
Government
Facility
Package of
Benefits
Private Facility

13.  By limiting the probability of getting ill by
covering only a list of illnesses with specific
limitations,
 By controlling the costs of getting ill by giving
contracts with providers and making them part of
the HMO setup, or sometimes even to the extent
of employing the providers. This makes them
capable of controlling medical service utilization
and bring down the cost of health care.

14.  Annual physical examination, including basic lab procedures
 Out-patient benefits, mainly consultation but NOT medication
 Preventive care, well baby visits (cost of vaccines not included)
 In-patient coverage, hospitalization including professional
fess, lab, medications, surgery if needed.
 Emergency coverage
 Dental, tooth extraction, prophylaxis and cleaning
 Maternal benefits
 Optical benefits
 Executive check up
 Insurance benefits

15. ◦ Are health packages that companies administer for
medical benefits of their employees.
◦ Ex.
 Meralco put up its own hospital for employees
 PAL has upscale medical facility and hospital referral
systems

16. ◦ Should have own clinics and set budgets for the
healthcare needs of the students.
◦ Manned by health officers(by MD/RN)
◦ Some may have own dental clinics