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-party payer system. What's different about car insurance?

Explanation / Answer

What is different about car insurance is the fact that like health insurance, the amount assessed is not dependent on the amount of expenses incurred for treatment. The car repair money which is spent post the accident needs to be verified as to its validity and authenticity. It can so happen that the owner of the vehicle may have caused the accident themselves, in order to claim the compensation amount from the Insurance Company. In such a case, it needs to be verified whether the accident to the vehicle was unknowingly or knowingly caused, and whether the damage can be reasonably certified, before making the payment to the claimant.

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