Health Insurance: The Trade-Off Between Risk Pooling and Moral Hazard.
RAND CORP SANTA MONICA CA
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Choosing economically optimal health insurance coverage involves a trade-off between risk reduction and the overuse of health care. The economic purpose of insurance is to reduce financial uncertainty or risk - the more health insurance lowers the risk, the greater will be the increase in social well-being. But increases in health insurance also increase the amount of medical care demand, because insurance lowers the out-of-pocket cost of health care - the larger the demand response of medical care to cost sharing, the greater the decrease in social well-being, due to the purchase of too much health care. This study examines this trade-off empirically by estimating both the demand for health insurance and the demand for health services. It relies on data from a randomized controlled trial of the cost sharings effects on the use of health services and on the health status for a general, nonelderly under age 65 population.
- Economics and Cost Analysis
- Medicine and Medical Research