Healthcare system as a \"third-party payer\" system: When you receive healthcare

Question

Healthcare system as a "third-party payer" system: When you receive healthcare in the U.S. generally you are not paying for it; you are paying for insurance, and your insurance pays for the healthcare. Hence, the payment is being made by a third party, your insurance company. The result is: People purchase more "healthcare" than they would if they were paying for it themselves. Your discussion question is this: What I just described could also apply to auto insurance! Most people have car insurance, and when they get in an accident it's the insurance company paying to repair their car; the money is not coming out of the driver's pocket (any more than the money for medicine is coming out of the patient's pocket). But in the market for auto repairs we do not see a situation where people "purchase" more repairs than they would if they had to pay for it themselves! Why not? Auto insurance is also a third-part V payer system. What's different about car insurance?

Explanation / Answer

First point is replaceable nature. While human itself is not replaceable and hence it is tendency to buy far more healthcare than required. Car on the other hand is machine and easily replaceable and it could have emotional value but generally it is easily replaceable in nature. So people tends to have less careful about it.

Second point is complexity. Human beings have complex physiological and psychological nature and it is seen that minor negligence towards body or mind to have deeper consequenses in later period. Even an accident could turn out to be lethal if it hurts important parts like brain. Also such accidents, illness tend to have longer than expected psychological effects on human beings. Considering such matters, healthcare is bought in excess of requirement.

Automobile on the other hand are assembly of parts and easily replaceable and in the extreme case could be sold as a junk if it has been damaged beyond repair. Also most of the time time consuming process of claiming for small amount dissuade people from claiming the cost and even to incur that.

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