Before the advent of Medicare and Medicaid and the HMO Act of 1973, the private sector funded over three quarters of the country's health care expenditures, individuals paid nearly one-half of total costs out-of-pocket and health care inflation was in-line with the consumer price index (CPI). When a third party pays the cost of routine health care services, consumers become insensitive to prices, quality, and choice of care setting. Individuals respond to lower cost-sharing (more comprehensive coverage) by utilizing more care, as well as more expensive care because they do not face the full price of their decisions at the point of utilization.
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