Question

Suppose that 75% of medical expenses were incurred by 10% of individuals. What would the implication of such a fact be for the success of health savings accounts (HSAs) in reducing the moral hazards associated with insurance? Explain.

Answer 1

If  75% of medical expenses were incurred by 10% of individuals, then you can expect that even after certain person pay highs annual deductibles after a huge medical expense, this would not help decrease the moral hazards associated with the insurances. And also, the majority of people don’t incur major medical expenses, only a little percentage do. That means even if the person hasone of the best insurance, this may have not much influence in the amount of the medical expenses.