Unbiased Analysis of Today's Healthcare Issues
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,…
‘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…
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…
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…
One of the major reasons why President Bushâs 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…
“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 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…
Economists typically assume that the majority of additional costs employers incur from hiring a worker are reflected in a lower compensation package for the employee. For instance, employees owe payroll taxes for Social Security and Medicare on 7.65% (Social Security taxes are limited to earnings below $94,000 in 2006, but Medicare taxes are applied on…
Malcolm Gladwell is the author of the best selling book The Tipping Point. In his August 2005 New Yorker article (“The Moral Hazard Myth“), he gives a wonderful description moral hazard, the major reason many economists oppose overly generous health insurance schemes. A few excerpts: “Moral hazard” is the term economists use to describe the…
On The Health Care Blog, Brian Klepper of the Center for Practical Health Reform weighs in on his opinion on HDHP (“Can Consumerism Save Healthcare?“). A few of his major points: Imperfect Information still a problem: HDHP’s force consumers to absorb a portion of the health care cost and thus these individuals should shop for…