Which of the following would increase the incentive of consumers to economize and of producers to provide medical services at economical prices?
A) substitution of catastrophic health insurance plans for low deductible, low co-payment plans
B) more reliance on medical savings accounts rather than insurance
C) equalization of tax treatment between out-of-pocket medical expenses and employer-provided health insurance
D) all of the above

Question

Quizplus · Accepted Answer

Substitution of catastrophic health insurance plans for low deductible, low co-payment plans would incentivize consumers to economize because they would bear a larger portion of the cost of medical services, making them more thoughtful about whether a particular service is necessary. This, in turn, would incentivize providers to offer services at more competitive prices, as consumers would be less likely to pay for unnecessary services.

More reliance on medical savings accounts rather than insurance would also incentivize consumers to economize, as they would have a set amount of money to use for medical expenses, rather than relying on insurance to cover the costs. Providers may also offer more competitive prices to attract consumers with limited funds in their savings accounts.

Equalization of tax treatment between out-of-pocket medical expenses and employer-provided health insurance would remove the current tax advantage of employer-provided insurance, which could incentivize employers to offer cheaper insurance plans or provide more cash compensation instead. This would also incentivize consumers to shop around and compare the costs of different insurance plans, fostering a more competitive marketplace.

Which of the Following Would Increase the Incentive of Consumers