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| Author: | Ma, C.-T. A. Riordan, M. H. |
| Title: | Health Insurance, Moral Hazard, and Managed Care |
| Journal: | Journal of Economics & Management Strategy
2002 : SPRING, VOL. 11:1, p. 81-108 |
| Index terms: | HEALTH INSURANCE HEALTH MORAL HAZARD ANALYTICAL REVIEW |
| Language: | eng |
| Abstract: | If an illness is not contractible, then even partially insured consumers demand treatment for it when the benefit is less than the cost, a condition known as moral hazard. Traditional health insurance, which controls moral hazard with copayments (demand management), can result in either a deficient or an excessive provision of treatment relative to ideal insurance. In particular, treatment for a low-probability illness is deficient if illness per se has little effect on the consumer's marginal utility of income and if the consumer's price elasticity of expected demand for treatment is large relative to the risk-spreading distortion when these are evaluated at a copayment that brings forth the ideal provision of treatment. |
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