Within the discussion about the increasing expenditures in health insurance, the overutilization of medical care is often attributed to the existence of a moral hazard problem. Since moral hazard has a great impact on health insurance policies, there is a growing interest in the economic literature to identify and to measure its effects. Although the problem of overconsumption of medical care does not mean moral hazard per se, the determination of the latter may reduce its scope and help to mitigate the problem of overutilization. The main objective of this paper is an empirical evidence of the moral hazard phenomenon. By analysing the economic literature on moral hazard in health insurance this paper seeks for examples of its empirical evidence, whereby the emphasis lies on distinguishing between the demand-oriented (especially ex-post) and the supply-oriented (external) moral hazard.
Table of Contents
1. Introduction
2. The phenomenon of moral hazard
3. The empirical identification of moral hazard
3.1 Full insurance and health care demand
3.2 Moral hazard and health care providers
4. Conclusion
Objectives & Themes
The primary objective of this paper is to provide an empirical overview of the moral hazard phenomenon within health insurance. By synthesizing economic literature, the study seeks to identify and quantify the effects of moral hazard while specifically distinguishing between demand-oriented, consumer-based behavior and supply-oriented, provider-induced demand.
- The theoretical evolution and definition of moral hazard in health insurance
- Demand-side moral hazard as a consequence of full insurance coverage
- Supply-side moral hazard and the role of information asymmetry
- The impact of fee-for-service systems on provider behavior
- Analysis of empirical studies, including the RAND Health Insurance Experiment
- Policy implications for cost-sharing models and health insurance design
Excerpt from the Book
3.2 Moral hazard and health care providers
Although, coinsurance is likely to weaken the problem of overdemand, it is often not taken into consideration that the demand for medical care is of supply-induced nature. Since the most important decisions about patient’s treatment are made by physicians, not by patients, the demand for health care is strongly determined by health care providers (Holst, 2008, p. 60-61).
The observed problem in health economics could be explained with the principal-agent theory, where two different parties have asymmetric information (the agent have more information). According to this theory, a patient (the principal) asks his physician (the agent) to act in his (patient’s) interests. At first glance the direct interaction between the patient and the physician may appear as a classical market mechanism, in which the forces of demand and supply are independent from each other. However, in health insurance there are serious limitations in aspects of patient autonomy and consumer sovereignty. The information asymmetry between the agent and the principle and the lack of knowledge of the latter make the reasons for a treatment and its opportunities overwhelming for the patient. Furthermore, there is usually no direct communication between doctors and insurance companies; the information exchange can be shown as follows: insurance company <-> patient <-> health care provider. Having more information, the agent may act in his own interests, which are suboptimal to those of the principal. In spite of all undoubtedly meaningful efforts to strengthen patient autonomy, the imbalance in the relationship between the patient and the physician still remains. In addition to it, since physicians are being paid according to the fee-for-service system, they have a growing interest to treat their patients with unnecessary services (Jacobs et al., 2010, p. 19).
Summary of Chapters
1. Introduction: This chapter introduces the concept of moral hazard as a factor for increasing health expenditures and outlines the paper's aim to distinguish between demand-oriented and supply-oriented perspectives.
2. The phenomenon of moral hazard: This section provides the theoretical background, tracing the origins of moral hazard and detailing how influential economists like Arrow and Pauly framed it as a rational response to insurance incentives.
3. The empirical identification of moral hazard: This chapter analyzes how moral hazard is empirically measured, focusing on both consumer behavior and the influence of information asymmetries between patients and providers.
3.1 Full insurance and health care demand: This section utilizes findings from the RAND Health Insurance Experiment to demonstrate the impact of coinsurance rates on the demand for medical services.
3.2 Moral hazard and health care providers: This chapter explores the role of physicians as agents for patients, explaining how supply-induced demand and information asymmetry contribute to overutilization.
4. Conclusion: The final section summarizes the main findings, noting that while moral hazard is a significant issue, it may be overemphasized and that the complexity of healthcare necessitates a balanced view of both demand and supply factors.
Keywords
Moral Hazard, Health Insurance, Demand-side Moral Hazard, Supply-side Moral Hazard, Principal-Agent Theory, Information Asymmetry, Coinsurance, RAND Health Insurance Experiment, Medical Care, Overutilization, Fee-for-service, Price Elasticity, Healthcare Expenditures, Welfare Economics, Patient Autonomy.
Frequently Asked Questions
What is the core focus of this seminar paper?
The paper examines the phenomenon of moral hazard in health insurance from an empirical perspective, seeking to identify and quantify its effects on the overutilization of medical services.
Which key thematic areas are covered?
The study covers the theoretical foundations of moral hazard, demand-side issues caused by full insurance, supply-side factors induced by healthcare providers, and the empirical challenges of identifying these behaviors.
What is the primary research goal?
The main objective is to analyze existing economic literature to find empirical evidence of moral hazard and to differentiate between consumer-driven demand and provider-driven service utilization.
Which scientific methodology is applied?
The paper employs a comprehensive review and synthesis of secondary economic literature, including classical theoretical papers and specific empirical studies like the RAND Health Insurance Experiment.
What is discussed in the main body of the text?
The main body focuses on the evolution of the term moral hazard, the impact of insurance contracts on consumer demand, and the principal-agent relationship between physicians and patients.
Which keywords best characterize this work?
Key terms include moral hazard, health insurance, principal-agent theory, information asymmetry, coinsurance, and supply-induced demand.
How does the author define the difference between demand-side and supply-side moral hazard?
Demand-side moral hazard refers to the patient's propensity to use more services because costs are covered by insurance. Supply-side moral hazard relates to providers using their informational advantage to recommend unnecessary treatments to maximize their own revenue.
What role does the RAND Health Insurance Experiment play in this paper?
It serves as a primary empirical reference point to demonstrate how variations in coinsurance rates directly influence the demand for medical services, providing concrete data on price sensitivity.
What does the paper conclude regarding the importance of moral hazard?
The conclusion suggests that while moral hazard is a valid economic concern, its impact might be overemphasized, and policymakers should also consider the significant influence of provider decisions rather than just focusing on patient behavior.
- Citar trabajo
- Olesya Kazantseva (Autor), 2014, Moral Hazard Effects in Health Insurance, Múnich, GRIN Verlag, https://www.grin.com/document/276825
