The health care system has many participants: health care providers, pharmaceutical companies, individuals as patients, individuals as tax payers, insurance companies, employers, and the government. Consider the possibility of a new treatment for an illness. What incentives do the different participants have with respect to adopting and implementing this treatment? When do these incentives create inefficiencies due to factors such as moral hazard or adverse selection? Explain how these incentives depend on the nature of the treatment (for example, does it work quickly or slowly, is it inexpensive or very costly, is it reliable or uncertain in its effectiveness, etc.) and on the nature of the health care system (is there managed care or fee for service, how does the insurance system operate, etc.).

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The incentives participants have with respect to adopting and implementing this treatment are Health ... View the full answer