Because patients do not bear the full costs of treatment, an incentive exists to over consume health care. This problem is known as the moral hazard. Typically, patients will only pay a portion of the treatment cost as a co-payment fee. The responsibility of payment had shifted from the ultimate users of health care, to both public and private health care providers. The implementation of managed care not only affects the payment for medical care, but also affects the quality of care, the costs associated with technological development, and the local and national economies.
Argentina has over 500 health insurance programs, the majority of which are run by labor unions (IDRC.com, 2002). The largest of these labor union insurance programs is the Obras Socials. This program works similar to the way the U.S. program works. Employees are taxed 3% of their income, and employers contribute 6%. The majority of these funds are retained by the union, and between 10-15% goes to finance the public health plan. In the past, labor unions were protected by tax exemptions and barriers to competition, which led to "years of corruption, mismanagement, inefficiencies and high costs." The transformation in insurance is now breaking down those barriers. Another private health insurance company in Argentina is called "Prepagas." This is known a Pre-Paid Health Services Supplier, or PPHSS. People pay a set fee to this company, and in the event that care is needed, Prepagas performs the agreed upon service (Corporateinformation.com, 2002). This service differs from other health insurance organizations, because Prepagas actually performs the service. Other forms of insurance will pay for, or reimburse for the care provided by a third party. .
In addition to the problem of moral hazard, insurers are also at a diasadvantage because of adverse selection. This term refers to the trend of high risk candidates seeking insurance.