Insurance Because risk and uncertainty are inherent in healthcare, most consumers have health insurance, and healthcare organizations have to contend with the management problems insurance presents. First, insurance creates confu- sion about who the customer is. Customers use the products, but insurance plans often pay most of the bill. Moreover, most people with private medi- cal insurance receive coverage through their employer (in large part because the tax system makes this arrangement advantageous). Although economists generally agree that employees ultimately pay for insurance via wage reduc- tions, most employees do not know the costs of their insurance alternatives (and unless they are changing jobs, they have limited interest in finding out). As a result of this situation, employees remain unaware of the true costs of care and are not eager to balance cost and value. If insurance is footing the bill, most patients choose the best, most expensive treatment—a choice they might not make if they were paying the full cost.
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