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Incentives and Health Care

Economists like to say that people act in accordance with the incentives they face (that is, in accordance with the rewards or punishments set up for various actions, or, if you will, in accordance with costs and benefits to various choices.) Let us use the health care system in the United States as a topic. Specifically, answer the following four questions:
1. You go out to dinner with a group (friends or family or co-workers). Does your choice of what dish to order depend on your belief about who is going to pay for the meal?
Explain and discuss.
2. Most of the people who have health care coverage in the United States are covered by a third party payer (Medicaid, Medicare, or an insurance company.) How does having such coverage affect the amount and type of health care products and
services (doctor's visits, hospital procedures, drugs, medical devices) consumers choose to purchase?

Solution Preview

If you know that a fairly wealthy person will be paying for the meal, you are more likely to order something expensive. You would figure that the cost of your dinner will not cause problems for the payer so you might as well enjoy yourself. On the other ...

Solution Summary

The use of incentives to encourage healthy choices