Early Retirement & Financial Independence Community - View Single Post - health insurance and effect on increased health care costs

justin · 08-08-2006, 12:13 PM

Seems like basic econ 101. I think I wrote a paper in econ 101 freshman year with the same basic conclusion re: health insurance.

Basic supply and demand are thrown off kilter by subsidies (insurance). Theory says when consumers don't have to pay (or pay very little) for what they consume, they will consume much more until the value of treatment/medicine they receive is equal to the cost they pay (in money or time).

If a simple office visit were to cost $100, that is a high threshold to seek treatment. In other words, most wouldn't pay the price for a runny nose or cough.

Only require the consumer to pay $10 copay, and all of a sudden very minor problems "need" medical attention. The value received by the office visit exceeds the consumer's cost of $10.

As to the larger question of High deductible plans curbing medical consumption, good or bad? Dunno.

08-08-2006, 12:13 PM	#2
justin Thinks s/he gets paid by the post Join Date: Jun 2005 Posts: 4,009	Seems like basic econ 101. I think I wrote a paper in econ 101 freshman year with the same basic conclusion re: health insurance. Basic supply and demand are thrown off kilter by subsidies (insurance). Theory says when consumers don't have to pay (or pay very little) for what they consume, they will consume much more until the value of treatment/medicine they receive is equal to the cost they pay (in money or time). If a simple office visit were to cost $100, that is a high threshold to seek treatment. In other words, most wouldn't pay the price for a runny nose or cough. Only require the consumer to pay $10 copay, and all of a sudden very minor problems "need" medical attention. The value received by the office visit exceeds the consumer's cost of $10. As to the larger question of High deductible plans curbing medical consumption, good or bad? Dunno.