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Health Insurance and Ex Ante Moral Hazard: Evidence from Medicare

  • Dhaval Dave
  • Robert Kaestner

Basic economic theory suggests that health insurance coverage may cause a reduction in prevention activities, but empirical studies have yet to provide much evidence to support this prediction. However, in other insurance contexts that involve adverse health events, evidence of ex ante moral hazard is more consistent. In this paper, we extend the analysis of the effect of health insurance on health behaviors by allowing for the possibility that health insurance has a direct (ex ante moral hazard) and indirect effect on health behaviors. The indirect effect works through changes in health promotion information and the probability of illness that may be a byproduct of insurance-induced greater contact with medical professionals. We identify these two effects and in doing so identify the pure ex ante moral hazard effect. This study exploits the plausibly exogenous variation in health insurance as a result of obtaining Medicare coverage at age 65. We find evidence that obtaining health insurance reduces prevention and increases unhealthy behaviors among elderly men. We also find evidence that physician counseling is successful in changing health behaviors.

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File URL: http://www.nber.org/papers/w12764.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12764.

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Date of creation: Dec 2006
Date of revision:
Publication status: published as International Journal of Health Care Finance and Economics, Volume: 9 Issue: 4, Pages: 367-390 (December 2009)
Handle: RePEc:nbr:nberwo:12764
Note: HE AG HC
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  1. David Card & Carlos Dobkin & Nicole Maestas, 2004. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare," NBER Working Papers 10365, National Bureau of Economic Research, Inc.
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  4. Kaestner, R. & Joyce, T. & Racine, A., 2001. "Medicaid eligibility and the incidence of ambulatory care sensitive hospitalizations for children," Social Science & Medicine, Elsevier, vol. 52(2), pages 305-313, January.
  5. Sandra L. Decker, 2005. "Medicare and the Health of Women with Breast Cancer," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 948-968.
  6. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459 Elsevier.
  7. Jonathan Klick & Thomas Stratmann, 2007. "Diabetes Treatments and Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 519-538.
  8. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1263-96, December.
  9. Ruser, John W, 1991. "Workers' Compensation and Occupational Injuries and Illnesses," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 325-50, October.
  10. John W. Ruser, 1985. "Workers' Compensation Insurance, Experience-Rating, and Occupational Injuries," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 487-503, Winter.
  11. Christophe Courbage & Augustin de Coulon, 2004. "Prevention and Private Health Insurance in the U.K," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 29(4), pages 719-727, October.
  12. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
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