Why does the cost of a good or service often vary depending on a person's insurance status?

• A. Uninsured individuals receive government subsidies that reduce their costs.
• B. Insured individuals always pay more because insurance increases demand for services.
• C. Providers charge everyone the same price regardless of insurance status.
• D. Insurance companies negotiate lower prices with providers, resulting in different costs for insured individuals.

Answer: (D)

Verified step by step guidance

1. Understand that the price a consumer pays for a good or service can differ based on their insurance status because insurance companies act as intermediaries between consumers and providers.
2. Recognize that insurance companies negotiate prices with providers to obtain discounts or lower rates than the standard charges, which affects the final cost paid by insured individuals.
3. Note that uninsured individuals typically pay the full list price or retail price set by providers, as they do not benefit from negotiated discounts.
4. Consider that this negotiation process leads to price variation: insured individuals often pay less out-of-pocket due to these negotiated rates, while uninsured individuals face higher costs.
5. Conclude that the variation in cost is not because providers charge everyone the same or because insurance always increases demand, but because insurance companies leverage their bargaining power to reduce prices for their members.