Using the age-based insurance eligibility criterion to estimate moral hazard in medical care consumption

• Published in: Financial theory and practice Vol. 40; no. 3; pp. 337 - 356
• Main Authors: Zheng, Yan, Vukina, Tomislav
• Format: Journal Article Paper
• Language: English
• Published: Institut za javne financije 08.09.2016; Institute of Public Finance
• Subjects: fuzzy regression discontinuity design; fuzzy regression discontinuity design; instrumental variables; health insurance; health insurance; instrumental variables
• ISSN: 1846-887X; 1845-9757; 1845-9757
• DOI: 10.3326/fintp.40.3.3

This paper uses fuzzy regression discontinuity design to estimate the moral hazard effect in health care consumption in the population of young adults. We use invoice data for outpatient hospital services from a regional hospital in Croatia.The estimation is complicated by the fact that the data set consists only of users of medical services, which would tend to underestimate the moral hazard effect. To address this issue we use a modified version of the instrumental variables approach.We find a 92% reduction in the number of hospital visits for individuals who lost insurance coverage when crossing the 18th birthday threshold.