Cavalcade of Risk #4 posted

The Cavalcade of Risk #4 is posted.  From the C or R website: The purpose of the C of R is to offer insights into the world of risk management; generally, this will be insurance-related, but that’s not a requirement. Our goal is to help folks understand what risk is, and how to manage it.…

Optimal Health Insurance and Provider Payment

How does one design an optimal insurance policy where physicians and patients are compelled to tell the truth about the medical procedures that were completed?  This is the question of Ching-To Albert Ma and Thomas McGuire in their 1997 AER paper.  The paper is somewhat technical but I will briefly explain their setup and conclusions,…

Private Information and Long-Term Care Insurance

‘Adverse selection’ and ‘moral hazard’ are phenomenons which affect any analysis of the insurance market.  For instance, Cutler and Zeckhauser (1997) speak of an adverse selection ‘death spiral’ which made untenable the continued offering of a generous health insurance benefit at Harvard University.  In their NBER paper, Finkelstein and McGarry (2003) attempt to estimate the effect…

Medical Service Bargain hunters?

According to the Kaiser Family Foundation’s (KFF) 2005 Employer Health Benefits Survey, the estimated number of firms who will offer high deductible health plans has increased to 20% in 2005.  This is up from 5% in 2003 and 10% in 2004.  Despite this increase, only 3.9% of workers–about 2.4 million in total–are covered either by a…

Millions wasted on unnecessary test

Forbes reported last week (“Millions…“) that millions of dollars are wasted each year due to unnecessary tests. Their findings are based on an article by Dr. Dan Merenstein and co-authors and is to appear in the June issue of the American Journal of Preventive Medicine. What is the definition of an unnecessary test? The United…

On moral hazard and insurance

One of the major reasons why President Bush’s plan for Health Savings Accounts (HSA) required that participants use high-deductible health plans (HDHP) was to lessen the incidence of moral hazard. When an individual is insured against medical expenses, they are not liable for the full cost of medical services and thus are more prone to…

HealthCare Direct LLC

“One of the quirks of the health care system is that health plans individually negotiate different prices with hospitals and doctors. The result is that two health plans can pay different prices for the same procedure at the same hospital. The contracts typically prevent a health plan from saying that it charges a certain amount…

The libertarian health care system

The poor can not afford health care. Health care costs rise above inflation year after year. Serious errors committed by hospitals and physicians are reported by the news media on a daily basis. How can we fix these problems? Can we rely on Uncle Sam to do what’s needed? Will Wilkinson doubts that government intervention…