Working Paper: NBER ID: w12764
Authors: Dhaval Dave; Robert Kaestner
Abstract: Basic economic theory suggests that health insurance coverage may cause a reduction in prevention activities, but empirical studies have yet to provide much evidence to support this prediction. However, in other insurance contexts that involve adverse health events, evidence of ex ante moral hazard is more consistent. In this paper, we extend the analysis of the effect of health insurance on health behaviors by allowing for the possibility that health insurance has a direct (ex ante moral hazard) and indirect effect on health behaviors. The indirect effect works through changes in health promotion information and the probability of illness that may be a byproduct of insurance-induced greater contact with medical professionals. We identify these two effects and in doing so identify the pure ex ante moral hazard effect. This study exploits the plausibly exogenous variation in health insurance as a result of obtaining Medicare coverage at age 65. We find evidence that obtaining health insurance reduces prevention and increases unhealthy behaviors among elderly men. We also find evidence that physician counseling is successful in changing health behaviors.
Keywords: Health Insurance; Moral Hazard; Medicare; Health Behaviors
JEL Codes: I12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicare coverage (I13) | probability of engaging in vigorous physical exercise (C46) |
| Medicare coverage (I13) | probability of quitting cigarette use (J26) |
| Medicare coverage (I13) | prevalence of daily smoking (I12) |
| Medicare coverage (I13) | daily cigarette consumption (I12) |
| Medicare coverage (I13) | probability of current alcohol use (C29) |
| increased medical contact due to Medicare coverage (I18) | ex ante moral hazard effect (D82) |