Question

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80 (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake)

Answer 1

When there is an insurance policy, the consumer pays only $20.

From the complete question, the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket.

If the cost of each procedure to the society is $100, and if the individuals have health insurance as described, the number of the procedures performed will be greater than the number that will maximize the total surplus. Also, economists often blame less insurance system for excessive use of medical care.

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