Because of third-party payment for services in the market for health care, the price paid by buyers is less than the payment sellers receive, and the marginal social cost of health care exceeds its mar?ginal social benefit.

Question

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Third-party payment in the health care market leads to a principal-agent problem where the buyer (patient) is not paying the full cost of the service, resulting in overconsumption and an inefficient allocation of resources. This means that the marginal social cost of health care (including the negative externalities of overconsumption) exceeds its marginal social benefit, indicating market failure.

Because of Third-Party Payment for Services in the Market for Health