Unbiased Analysis of Today's Healthcare Issues
Moral hazard and adverse selection are ever-present problems in the health insurance market. Identifying their existence and their magnitudes is difficult. Most of the papers presented in this blog have used a reduced form approach [see Finkelstein, McGarry (2003) and Bhattacharya, Vogt (2006)]. Today we will look at a paper by Bajari, Hong and Khwaja where the…
‘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…
One key parameter of interest to policymakers is the firms elasticity of offering health insurance with respect to price. This is an important question because the current tax exemption of employee compensation in the form health insurance in essence changes the price of health insurance. A large—in absolute value—elasticity would imply that the tax subsidy…