Should the government pay for whatever is on the receipt?

Paying for amounts printed on receipts is tantamount to subscribing to FFS rather than ACR. As illustrated above, this is inefficient and could likely promote external fraud. ACR, however, is far from perfect but averaging should’ve been the best method to determine the average cost of care needed for a specific case or procedure. The problem lies with how the input data was collected. While claims from the FFS reflect the cost of care as published by hospitals, this method has the tendency to both over- and underestimate the “true” cost of care. 

Because hospitals have the incentive to increase the production of services (in order to gain more income) under the FFS scheme, the costs from these claims may overestimate the true cost. Moreover, using the claims from FFS alone has the potential to underestimate the true cost because these claims (as in epidemiology) may not be representative of the population. Outliers can distort the dataset. And because the mean/average is very sensitive to outliers, the presence of such outliers distort the cost which does not provide a true representation.


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