Explain how both overtreatment and undertreatment can be caused by financial incentives.

What will be an ideal response?

Overtreatment has appeared in a number of studies documenting excessive use of medical technology and drugs as a means of generating more income for physicians and hospitals. For the public sector, overtreatment means increased costs for Medicare and Medicaid patients, as well as the human costs imposed on the patients. This problem appears to be declining, as fewer and fewer patients have indemnity insurance, which pays providers on a fee-for-service basis. Rather, the current quality problem in health care is undertreatment, as managed care places pressures on providers not to provide services. Government regulators have begun to intervene to ensure that patients receive adequate care by regulating the length of hospital stay for some procedures. Because they have an economic interest in not providing services, health maintenance organizations and other managed care providers use screening devices--such as prohibiting doctors from informing patients about expensive treatments that might be beneficial--to prevent patients from receiving certain types of care. These “gag rules” have now been largely eliminated because of pressures from government and the medical providers, and many states make insurance companies and HMOs liable if they do not provide information and needed care.