Working Paper: NBER ID: w12445
Authors: Patrick Bajari; Han Hong; Ahmed Khwaja
Abstract: Theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard. However, previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care. We empirically study this question by using data from the Health and Retirement Study to estimate a structural model of the demand for health insurance and medical care. Using a two-step semi-parametric estimation strategy we find significant evidence of moral hazard, but not of adverse selection.
Keywords: Moral hazard; Adverse selection; Health expenditures; Semiparametric analysis
JEL Codes: C14; D82; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher copayment rates (I13) | Total medical expenditures (H51) |
| 1% increase in copayment rate (E64) | Total medical expenditures (H51) |
| Moral hazard (G52) | Total medical expenditures (H51) |
| Adverse selection (D82) | Distribution of latent health shocks (I14) |
| Distribution of latent health shocks (I14) | Insurance types (G52) |