Cross subsidies describe a pricing distortion where one group of customers is forced to pay above-market rates to artificially lower costs for another group, typically through regulatory mandate rather than voluntary exchange. In health care, cross subsidies can obscure true costs, misallocate resources, and prevent price signals from functioning properly. They create market inefficiencies by disconnecting the price paid from the actual cost of service, undermining competition and preventing consumers from making informed choices based on transparent pricing.
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