Health Care Flashcards
How does insurance work?
Patients do not have to pay full price of care so demand shifts out; Q and P rise, but insurers cover part of payment; Increases price of health care
What is the problem with health care?
DWL occurs because of overconsumption– too much health care
Principal-Agent Problem
Interests differ; Doctor (agent) over treats patient (principal) to maximize profits; Actions of agent affect principal’s well-being
What is the issue with mandates?
People must buy insurance even if they don’t need it, if not they pay higher taxes
Moral Hazard
People with insurance behave more dangerously; Driving more recklessly, not locking doors
Adverse Selection
People who buy insurance are the people who need it; Ex: Only people susceptible to earthquakes buy the insurance
