Prospective payment in the hospital sector
a. resulted in the hospital keeping any surplus payment.
b. resulted in the hospital absorbing any loss from the payment.
c. changed the incentive structure completely.
d. all of these are true.
Question 2
What tradeoffs are present in the moral-hazard-in-insurance problem?
a. Full insurance benefits the risk-averse customer but gives him excessive incentives to take care to avoid harm.
b. Full insurance benefits the risk-averse customer but provides him with no incentive to take care to avoid harm.
c. Full insurance benefits the risk-averse consumers but does not allow the insurer to extract as much surplus from all types.
d. Full insurance is beneficial for all consumers, but if sold at an actuarially fair price for the population will draw only the riskiest types.
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