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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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    More about this item

    Keywords

    Health insurance; adverse selection; moral hazard; health care expenditure;
    All these keywords.

    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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