Decomposition of moral hazard

John A. Nyman, Cagatay Koc, Bryan E. Dowd, Ellen McCreedy, Helen Markelova Trenz

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

This study seeks to simulate the portion of moral hazard that is due to the income transfer contained in the coinsurance price reduction. Healthcare spending of uninsured individuals from the MEPS with a priority health condition is compared with the predicted counterfactual spending of those same individuals if they were insured with either (1) a conventional policy that paid off with a coinsurance rate or (2) a contingent claims policy that paid off by a lump sum payment upon becoming ill. The lump sum payment is set to be equal to the insurer's predicted spending under the coinsurance policy. The proportion of moral hazard that is efficient is calculated as the proportion of total moral hazard that is generated by this lump sum payment. We find that the efficient proportion of moral hazard varies from disease to disease, but is the highest for those with diabetes and cancer.

Original languageEnglish (US)
Pages (from-to)168-178
Number of pages11
JournalJournal of Health Economics
Volume57
DOIs
StatePublished - Jan 2018

Bibliographical note

Funding Information:
The authors are grateful to the Agency for Healthcare Policy and Research and the Institute of Aging of the National Institutes of Health for providing funding for this study (grant numbers US DHHS AHRQ/5R01-HS018328-02 REV and NIH/5R01-AG041753-02 , respectively).

Publisher Copyright:
© 2017 Elsevier B.V.

Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.

Keywords

  • Efficient moral hazard
  • Health insurance income effects
  • Moral hazard

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