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Basic Versus Supplementary Health Insurance : Moral Hazard and Adverse Selection

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  • Boone, J.

    (Tilburg University, Center For Economic Research)

Abstract

This paper introduces a tractable model of health insurance with both moral hazard and adverse selection. We show that government sponsored universal basic insurance should cover treatments with the biggest adverse selection problems. Treatments not covered by basic insurance can be covered on the private supplementary insurance market. Surprisingly, the cost effectiveness of a treatment does not affect its priority to be covered by basic insurance.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Boone, J., 2014. "Basic Versus Supplementary Health Insurance : Moral Hazard and Adverse Selection," Discussion Paper 2014-059, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:8ad45428-2ab4-406f-bbd3-3763d3f6aab4
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    References listed on IDEAS

    as
    1. Boone, J., 2014. "Basic versus Supplementary Health Insurance : The Role of Cost Effectiveness and Prevalence," Discussion Paper 2014-065, Tilburg University, Center for Economic Research.
    2. Robin Boadway & Manuel Leite‐Monteiro & Maurice Marchand & Pierre Pestieau, 2006. "Social Insurance and Redistribution with Moral Hazard and Adverse Selection," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 279-298, July.
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    4. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643, Elsevier.
    5. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
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    11. Boone, Jan, 2015. "Basic versus supplementary health insurance: Moral hazard and adverse selection," Journal of Public Economics, Elsevier, vol. 128(C), pages 50-58.
    12. repec:hal:spmain:info:hdl:2441/3ihldo33ik9ee94procjtfki5f is not listed on IDEAS
    13. Liran Einav & Amy Finkelstein, 2011. "Selection in Insurance Markets: Theory and Empirics in Pictures," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 115-138, Winter.
    14. Ellis, Randall P. & Jiang, Shenyi & Manning, Willard G., 2015. "Optimal health insurance for multiple goods and time periods," Journal of Health Economics, Elsevier, vol. 41(C), pages 89-106.
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    23. Besley, Timothy J., 1988. "Optimal reimbursement health insurance and the theory of Ramsey taxation," Journal of Health Economics, Elsevier, vol. 7(4), pages 321-336, December.
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    26. Ellis, Randall P. & Manning, Willard G., 2007. "Optimal health insurance for prevention and treatment," Journal of Health Economics, Elsevier, vol. 26(6), pages 1128-1150, December.
    27. Mark V. Pauly, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 44-62.
    28. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    29. Manning, Willard G. & Marquis, M. Susan, 1996. "Health insurance: The tradeoff between risk pooling and moral hazard," Journal of Health Economics, Elsevier, vol. 15(5), pages 609-639, October.
    30. Boone, J., 2014. "Basic versus Supplementary Health Insurance : The Role of Cost Effectiveness and Prevalence," Other publications TiSEM be4cbf5b-f13b-460a-a9cc-1, Tilburg University, School of Economics and Management.
    31. Francesca Colombo & Nicole Tapay, 2004. "Private Health Insurance in OECD Countries: The Benefits and Costs for Individuals and Health Systems," OECD Health Working Papers 15, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Boone, Jan, 2015. "Basic versus supplementary health insurance: Moral hazard and adverse selection," Journal of Public Economics, Elsevier, vol. 128(C), pages 50-58.
    2. Boone, Jan, 2018. "Basic versus supplementary health insurance: Access to care and the role of cost effectiveness," Journal of Health Economics, Elsevier, vol. 60(C), pages 53-74.
    3. William Nganje & Kwame Asiam Addey, 2019. "Health Uninsurance in rural America: a partial equilibrium analysis," Health Economics Review, Springer, vol. 9(1), pages 1-15, December.
    4. Benjiang Ma & Qing Tang & Yifang Qin & Muhammad Farhan Bashir, 2021. "Policyholder cluster divergence based differential premium in diabetes insurance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1793-1807, October.
    5. Gemmo, Irina & Kubitza, Christian & Rothschild, Casey, 2020. "Constrained efficient equilibria in selection markets with continuous types," Journal of Public Economics, Elsevier, vol. 190(C).
    6. Aistov, Andrey V. (Аистов, Андрей) & Aleksandrova, Ekaterina A. (Александрова, Екатерина), 2018. "Ex Post Moral Hazard in Private Health Insurance [Постконтрактный Оппортунизм На Рынке Добровольного Медицинского Страхования]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 3, pages 148-181, June.
    7. Jiang, Yawen & Ni, Weiyi, 2020. "Impact of supplementary private health insurance on hospitalization and physical examination in China," China Economic Review, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    universal basic health insurance; voluntary supplementary insurance ; public vs private insurance; adverse selection; moral hazard; cost effectiveness;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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