Severity of Illness and the Welfare Effects of Moral Hazard

The extent to which the moral hazard caused by health insurance represents economic inefficiency has been the subject of much debate. This paper incorporates health status in a model of moral hazard, and finds that seriously ill patients are likely to exhibit greater moral hazard than healthier pati...

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Bibliographic Details
Published inInternational journal of health care finance and economics Vol. 6; no. 4; pp. 290 - 299
Main Author Eisenhauer, Joseph G.
Format Journal Article
LanguageEnglish
Published United States Springer Science+Business Media 01.12.2006
Springer
Springer Nature B.V
SeriesInternational Journal of Health Care Finance and Economics
Subjects
Coinsurance
Consumers
Consumption
Demand curves
Diseases
Economics
Efficiency
G22
Health care
Health Care Sector - statistics & numerical data
Health insurance
Health Services Needs and Demand - economics
Health Status
Homeowners insurance
Humans
I11
Indifference curves
Insurance coverage
Insurance premiums
Insurance, Health - statistics & numerical data
Marginal rate of substitution
Market prices
Mathematical models
Medically Uninsured - statistics & numerical data
Models, Econometric
Moral hazard
Moral hazard models
Patient care
Patient Satisfaction - economics
Patient Satisfaction - statistics & numerical data
Production costs
Resource allocation
Resource Allocation - statistics & numerical data
Risk-Taking
Severity of illness
Severity of Illness Index
Social Welfare - economics
Statistical analysis
Studies
Uninsured people
United States
Value of Life - economics
Willingness to pay
United States
United States > US
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Summary:The extent to which the moral hazard caused by health insurance represents economic inefficiency has been the subject of much debate. This paper incorporates health status in a model of moral hazard, and finds that seriously ill patients are likely to exhibit greater moral hazard than healthier patients but the proportion of moral hazard that is inefficient declines with the severity of illness. Because of these competing tendencies, the cost of resource misallocation is parabolic in the severity of illness. The effect of the consumer's initial wealth endowment is also considered.
Bibliography:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
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ISSN:1389-6563
2199-9023
1573-6962
2199-9031
DOI:10.1007/s10754-006-9006-3