Working Paper: NBER ID: w24055
Authors: Liran Einav; Amy Finkelstein
Abstract: We describe research on the impact of health insurance on healthcare spending ("moral hazard"), and use this context to illustrate the value of and important complementarities between different empirical approaches. One common approach is to emphasize a credible research design; we review results from two randomized experiments, as well as some quasi-experimental studies. This work has produced compelling evidence that moral hazard in health insurance exists – that is, individuals, on average, consume less healthcare when they are required to pay more for it out of pocket – as well as qualitative evidence about its nature. These studies alone, however, provide little guidance for forecasting healthcare spending under contracts not directly observed in the data. Therefore, a second and complementary approach is to develop an economic model that can be used out of sample. We note that modeling choices can be consequential: different economic models may fit the reduced form but deliver different counterfactual predictions. An additional role of the more descriptive analyses is therefore to provide guidance regarding model choice.
Keywords: Moral Hazard; Health Insurance; Healthcare Spending
JEL Codes: D12; G22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| dynamic incentives (O31) | healthcare utilization (I11) |
| modeling choices (C52) | predictions about healthcare spending (H51) |
| insurance coverage (G52) | healthcare utilization (I11) |
| Medicaid coverage (I18) | healthcare spending (H51) |