Working Paper: CEPR ID: DP10199
Authors: Jan Boone
Abstract: This paper introduces a tractable model of health insurance with both moral hazard and adverse selection. We show that government sponsored universal basic insurance should cover treatments with the biggest adverse selection problems. Treatments not covered by basic insurance can be covered on the private supplementary insurance market. Surprisingly, the cost effectiveness of a treatment does not affect its priority to be covered by basic insurance.
Keywords: Adverse selection; Cost effectiveness; Moral hazard; Public vs private insurance; Universal basic health insurance; Voluntary supplementary insurance
JEL Codes: D82; H51; I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| severity of adverse selection (D82) | prioritization of treatments for coverage (H51) |
| moral hazard (G52) | prioritization of treatments for coverage (H51) |
| differences in risk between high-risk and low-risk types (C46) | government's decision on treatments to cover (H51) |
| government's choice of treatments to cover (H51) | treatments with significant adverse selection (D82) |
| appropriate copayment structures (D40) | efficient care consumption (D61) |