The fact that most medical care purchases are financed through insurance:

A) has no effect on health care consumption because aggregate costs are the same regardless of payment method.
B) reduces the amount of health care consumed by raising the price of additional units of care.
C) has decreased health care costs and therefore reduced aggregate health care expenditures.
D) increases the amount of health care consumed by reducing the price of additional units of care.

Question

Jimmy Nakhal · Accepted Answer

Final Answer : D, Explanation :  When medical care purchases are financed through insurance, the price of additional units of care is reduced, which leads to an increase in the amount of health care consumed. This phenomenon, known as moral hazard, is why insurance companies often require some out-of-pocket payment from patients to discourage overconsumption. Therefore, Choice D is the correct answer.

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