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A Median Voter Model of Health Insurance with Ex Post Moral Hazard

Author

Listed:
  • Jacob, Johanna

    (Department of Economics)

  • Lundin, Douglas

    (Stockholm School of Economics)

Abstract

One of the main features of health insurance is moral hazard, as defined by Pauly (1968); people face incentives for excess utilization of medical care since they do not pay the full marginal cost for provision. To mitigate the moral hazard problem, a coinsurance can be included in the insurance contract. We analyze under what conditions there is a conflict between individuals on what coinsurance rate should be set with public health insurance, and we establish conditions for a median-voter equilibrium. Then we allow the public insurance to be supplemented with private insurance, and we establish conditions under which public provision will lead to larger aggregate spending than private provision does.

Suggested Citation

  • Jacob, Johanna & Lundin, Douglas, 2001. "A Median Voter Model of Health Insurance with Ex Post Moral Hazard," Working Paper Series 2001:7, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2001_007
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    References listed on IDEAS

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    Cited by:

    1. Simona GRASSI, 2006. "On the characteristics of a mixed system of provision of a private good. An application to health care," Departmental Working Papers 2006-14, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

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    More about this item

    Keywords

    Health insurance; moral hazard; public provision; median voter;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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