In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a thi
rd-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?
The over-consumption of the services provided by health insurance companies are athe main reason of the inefficency of the system because in the end the consumer is paying a price that is below the standards for these services provided because of the nominal fee so the unbalance in the system's market ends up affecting the whole system in a very negative way, leading to an inefficient outcome.
