An externality is any impact, be it negative or positive, on individuals in each economic transaction. An externality in the health care market, is something that affects other people outside of the other parties involved in an exchange. The critical externality in most systems is the care provided to others. Health care costs are also affected by others choosing to purchase health care. The healthy pay more to the insurance company than they receive in treatment, while the opposite is true for the sick. Insurance fundamentally operates by taking the money from healthy people to pay for the procedures required by sick people. Taxpayers should be concerned with the state of the health care system not only because they pay for Medicare and Medicaid
