Citation

Eisenhauer JG. Int. J. Health Care Finance Econ. 2006; 6(4): 290-299.

Affiliation

Department of Economics, Canisius College, 2001 Main Street, Buffalo, NY 14208-1098, USA. eisenhauer@canisius.edu

Copyright

(Copyright © 2006, Springer)

DOI

10.1007/s10754-006-9006-3

PMID

17136599

Abstract

The extent to which the moral hazard caused by health insurance represents economic inefficiency has been the subject of much debate. This paper incorporates health status in a model of moral hazard, and finds that seriously ill patients are likely to exhibit greater moral hazard than healthier patients but the proportion of moral hazard that is inefficient declines with the severity of illness. Because of these competing tendencies, the cost of resource misallocation is parabolic in the severity of illness. The effect of the consumer's initial wealth endowment is also considered.

Language: en