As the fraction of health-care costs paid by consumers falls, their quantity of health-care services consumed increases.

Question

Quizplus · Accepted Answer

This phenomenon is known as moral hazard - when consumers are protected from the true cost of something, they may use it more frequently or indiscriminately. When health care costs are mostly covered by insurance, consumers are less aware of the prices of health services and are more likely to consume more of them.

As the Fraction of Health-Care Costs Paid by Consumers Falls