Question

Explain for each part below how one insurance contract can provide incentives to:

a. Choose a more or less expensive hospital.

b. Spend more or fewer days in the hospital.

c. Choose a more or less expensive surgeon.

d. Use more or fewer drugs.

e. Use more- or less-expensive drug

Answer 1

A. More expensive hospital.

Since one does not need to pay for the hospital cost, one would rather choose a more expensive hospital.

B. Spend more days

Since one does not need to pay for the insurance contract, one would like to spend more days for a better treatment.

C. More expensive surgeon

Since the payment will be made by the insurance contract, one would choose the more expensive surgeon.

D. Use more durgs as the expenses would be taken care of by the insurance.

E. More expensive drugs

More expensive drugs will be demanded because the expenses will be met by the insurance contract.