Third-party payment simply decreases the net price to the consumer, thus increasing the quantity of services demanded. The more a third party pays, the greater is the likelihood that a consumer will substitute medical services for a healthier lifestyle; Because of third-party payment, the effective price facing each consumer of medical services is often zero, or close to it. Thus, at the “low” price, it is not surprising that the quantity of medical services demanded has increased greatly. A person whose medical bills are completely paid by a third party is less likely to take steps to avoid a medical condition than one who must pay for all or part of the treatment. Government Health Care Subsidies: Persons with incomes as much as 33 percent above the poverty income level will qualify for Medicaid. Other individuals and families with income as much as four times the poverty level will get tax subsidies to buy required health insurance. Finally, firms that employ fewer than 25 workers who make less than $50,000 per year and provide health care insurance will receive tax subsidies
