Health Insurance: The Trade-Off Between Risk Pooling and Moral Hazard.
Abstract
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 sharing's effects on the use of health services and on the health status for a general, nonelderly (under age 65) population.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 1989
- Accession Number
- ADA257499
Entities
People
- M. S. Marquis
- Willard G. Manning
Organizations
- RAND Corporation