Chapter 15 & 16: Health Insurance

Traditional Consumer Transaction 

Healthcare Transaction 

Effect of Three-Party Healthcare Transaction (Paying premiums to a third party 

• Patient/Insured/Employee 

  • Lower "user price" of healthcare 

  • Less incentive to act as a traditional consumer (We do not question the price or cost of the services, for example, a medical test; This is because we are not the only paying for it; The insurance company is) 

  • What does this increase? Moral Hazard  

• Healthcare Providers  

  • Payment system based on fee-for-service (FFS) (they tend to provide as many services as possible) 

  • For each service (x-ray, flu test, etc.), a separate fee is paid.  

  • What's the financial incentive? 

End Result of Healthcare Transaction 

High Cost of Healthcare in U.S. 

• U.S. national health expenditures 

  • Nearly $4500000000000 in 2022 

  • 16.6% of Gross Domestic Product (GDP) 

  • 1 out of every 6 dollars spent on healthcare! 

  • $12555 per capita 

• Compared to other countries 

  • Switzerland 

    	$8049 per capita
    Germany	$8011 per capita
    Netherlands	$6729 per capita
    Canada	$6319 per capita