Severity of illness and the welfare effects of moral hazard
AbstractThe 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. Copyright Springer Science+Business Media, LLC 2006
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Bibliographic InfoArticle provided by Springer in its journal International Journal of Health Care Finance and Economics.
Volume (Year): 6 (2006)
Issue (Month): 4 (December)
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Web page: http://www.springerlink.com/link.asp?id=106603
Health insurance; Moral hazard; Severity of illness; Marginal rate of substitution; I11; G22;
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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- Gorsky, Martin & Guntupalli, Aravinda & Harris, Bernard & Hinde, Andrew, 2011. "The ‘cultural inflation of morbidity’ during the English mortality decline: A new look," Social Science & Medicine, Elsevier, vol. 73(12), pages 1775-1783.
- Wong, Irene O.L. & Lindner, Michael J. & Cowling, Benjamin J. & Lau, Eric H.Y. & Lo, Su-Vui & Leung, Gabriel M., 2010. "Measuring moral hazard and adverse selection by propensity scoring in the mixed health care economy of Hong Kong," Health Policy, Elsevier, vol. 95(1), pages 24-35, April.
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