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Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey

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  • Cardon, James H
  • Hendel, Igal

Abstract

Adverse selection is perceived to be a major source of market failure in insurance markets. There is little empirical evidence on the extent of the problem. We estimate a structural model of health insurance and health care choices using data on single individuals from the NMES. A robust prediction of adverse-selection models is that riskier types buy more coverage and, on average, end up using more care. We test for unobservables linking health insurance status and health care consumption. We find no evidence of informational asymmetries. Copyright 2001 by the RAND Corporation.

Suggested Citation

  • Cardon, James H & Hendel, Igal, 2001. "Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 408-427, Autumn.
  • Handle: RePEc:rje:randje:v:32:y:2001:i:3:p:408-27
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    References listed on IDEAS

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