As the share of healthcare expenditures paid for by third parties has grown, both healthcare prices and total expenditures have increased rapidly. Is this surprising?
A) Yes; third-party payments provide healthcare consumers with a strong incentive to economize, and therefore, the growth of expenditures is particularly surprising.
B) No; third-party payments weaken the incentive of healthcare consumers to economize, and therefore, the rapid growth of expenditures is an expected result.
C) Yes; the price increases are surprising because healthcare suppliers have a strong incentive to provide the services at a low price when they are paid for by a third party.
D) No; the growth of third-party payments will reduce the demand for healthcare, which will lead to both higher prices and expenditure levels.

Question

Quizplus · Accepted Answer

Third-party payments reduce the direct cost to consumers, weakening their incentive to economize, leading to increased demand and higher healthcare expenditures.

As the Share of Healthcare Expenditures Paid for by Third