What necessarily happens to average quality in a hospital ma

What necessarily happens to average quality in a hospital market when the generosity of insurance coverage increases? How does this relate, if at all, to the data about increases in hospital spending through time in the hospital sector?

Solution

The most obvious reason people purchase health insurance is to limit uncertainty associated with catastrophic health costs. There is no surety that they will have poor health when they wider insurance coverage. But still, if the insurance coverage increases in general, the demand for the hospital services generally should increase.

For two people with equal health, the person with insurance will potentially on average will have more doctor visits and are less likely not to take prescribed drugs than those without insurance. So generally with increase in insurance coverage, the hospital spending should increase. People will like to utilise the premium that they are paying.