Imagine two scenarios.In scenario 1,you have a $1 million health insurance policy.In scenario 2 you do not have health insurance.You earn an income of $40,000 and have $60,000 in savings.In both scenarios,you fall ill with exactly the same serious illness.In scenario 1,you undergo treatment that costs $850,000.In scenario 2,you undergo treatment that costs $50,000.Can you identify the moral hazard costs of health insurance in this case? If so,what are they? If not,why not? Explain your answer.

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The Answer of Imagine two scenarios.In scenario 1,you have a $1 million health insurance policy.In scenario 2 you do not have health insurance.You earn an income of $40,000 and have $60,000 in savings.In both scenarios,you fall ill with exactly the same serious illness.In scenario 1,you undergo treatment that costs $850,000.In scenario 2,you undergo treatment that costs $50,000.Can you identify the moral hazard costs of health insurance in this case? If so,what are they? If not,why not? Explain your answer.

Imagine Two Scenarios