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Adverse Selection, Moral Hazard and the Demand for Medigap Insurance

Author

Listed:
  • Michael Keane

    () (School of Economics and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

  • Olena Stavrunova

    () (School of Finance and Economics, University of Technology Sydney and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

Abstract

The size of adverse selection and moral hazard eects in health insurance markets has important policy implications. For example, if adverse selection eects are small while moral hazard eects are large, conventional remedies for inefficiencies created by adverse selection (e.g., mandatory insurance enrolment) may lead to substantial increases in health care spending. Unfortunately, there is no consensus on the magnitudes of adverse selection vs. moral hazard. This paper sheds new light on this important topic by studying the US Medigap (supplemental) health insurance market.

Suggested Citation

  • Michael Keane & Olena Stavrunova, 2011. "Adverse Selection, Moral Hazard and the Demand for Medigap Insurance," Working Papers 201119, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
  • Handle: RePEc:asb:wpaper:201119
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    File URL: http://cepar.edu.au/media/48634/Adverse%20Selection,%20Moral%20Hazard.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Vincenzo Atella & Alberto Holly & Alessandro Mistretta, 2016. "Disentangling Adverse Selection, Moral Hazard and Supply Induced Demand: An Empirical Analysis of The Demand For Healthcare Services," CEIS Research Paper 389, Tor Vergata University, CEIS, revised 28 Jun 2016.
    2. Hotchkiss, Julie L. & Rupasingha, Anil, 2016. "Wage Determination in Social Occupations: The Role of Individual Social Capital," FRB Atlanta Working Paper 2016-12, Federal Reserve Bank of Atlanta.
    3. Julie L. Hotchkiss, 2017. "Decennial Census Return Rates: The Role of Social Capital," Working Papers 17-39, Center for Economic Studies, U.S. Census Bureau.
    4. Woldemichael, Andinet & Gurara, Daniel Zerfu & Shimeles, Abebe, 2016. "Community-Based Health Insurance and Out-of-Pocket Healthcare Spending in Africa: Evidence from Rwanda," IZA Discussion Papers 9922, Institute for the Study of Labor (IZA).
    5. Stephen Kwasi Opoku Duku & Francis Asenso-Boadi & Edward Nketiah-Amponsah & Daniel Kojo Arhinful, 2016. "Utilization of healthcare services and renewal of health insurance membership: evidence of adverse selection in Ghana," Health Economics Review, Springer, vol. 6(1), pages 1-12, December.
    6. Michael Keane & Olena Stavrunova, 2011. "A smooth mixture of Tobits model for healthcare expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 20(9), pages 1126-1153, September.
    7. Mercy Raquel Orellana Bravo & Juan Andrés Piedra Peña & Luis Santiago Sarmiento Moscoso, 2017. "Evidence About The Moral Hazard In The Ecuadorian Health System," Journal of Smart Economic Growth, , vol. 2(1), pages 109-132, March.

    More about this item

    Keywords

    Health insurance; adverse selection; moral hazard; health care expenditure;

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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