For all intents and purposes, Professor Cochrane is explaining the economics of third-party payer, which occurs when government intervention undermines the ability of markets to promote efficiency and low prices.

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For a state governor, the ultimate third-party payer is the federal government.

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While contractual agreements between individuals and third party payers may be advisable to insure against catastrophic health events, it is important to realize that the ubiquity of the third party payer paradigm for ordinary healthcare arose not from the free market, but in response to government-imposed wage freezes enacted during World War II.

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