The demand for health care differs from demand for other services and the reason why consumer make irrational decision in their health care choices. If a consumer (patient) is a low income earner, the consumer may not seek health care for common health issues .Likewise a consumer (patient) who earns more may be more willing to spend on health care. The important factors that influencing healthcare spending are Technology, Healthcare product and service prices, market power, health insurance coverage etc.

Health insurance increases the demand for health care .In an economic point of view this fact raises the concern that individuals demand to much health care if insured, which generates welfare loss to the society. Moral hazard effect arises because individuals demand health care that has less value to them than it cost to provide it, because of this reason modern health insurance plans include demand side cost sharing instruments like deductibles and copayments. Insurance coverage reduces the users out of pocket expenditures, an outcome that is thought to stimulate demand, consumption and the other thing remaining constant, higher costs. Since insurance is intended to protect the individual from fiscal risk of injury or illness, it is possible that an increase in the cost of health care generates additional demand for coverage which, in turn contributes to the inflationary pressures in the health industry. Cost sharing instruments such as yearly deductibles combined with stop losses create no linear price schedules and dynamic incentives .This generates the question of whether patient understand the incentive and what price individuals use to determine their health care demand. Another important fact is it appears implausible that patients know the benefits of healthcare, which is crucial for the moral hazard argument. If the patients systematically underestimated these benefits they would demand too little healthcare without health insurance. Providing health insurance and increasing health care demand may increase social welfare.

      Some studies proved that millions of households in India spent more on their healthcare than their annual per capita consumption. That is why now a days paying out of the pocket to avail competent healthcare services is not a feasible option for most. Health insurance policies are a necessity.

         We can conclude that Policy makers around the world have introduced cost sharing programs to control rising health care expenditure .Numerous studies proved that the cost sharing reduces the demand for care but less complex cost sharing programs stimulate adherence to recommend care. If the programs are redesigned accordingly, individuals who had reported to have forgone a health service recommended by their treating physician due to cost sharing, would be more likely to use this service.