In the United States, the Bulk of Health Care Spending

question 64

Multiple Choice

In the United States, the bulk of health care spending is paid by health insurance companies.Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider.Why might such a system lead to an inefficient outcome?

• A)Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments.
• B)Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services.
• C)Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients.
• D)Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services.

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Definitions:

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