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Unformatted text preview: Dynamic Moral Hazard and Dynamic Moral Hazard and EmployerSponsored Insurance
Class 19 Loyola University Chicago Prof. Tim Classen March 14, 2011 Class Outline
Dynamic Moral Hazard (Glied article) EmployerBased Health Insurance Glied (2001) on Health Glied (2001) on Health Insurance and Market Failures
Avg. Medical Expenses among top 1% of medical care users as % of average income has grown from 130% to 300% What is market failure in absence of health insurance? Low competition levels in insurance served as response to need for risk pooling in face of adverse selection High costs of care for unexpected events would not have coverage Market failures since Arrow Market failures since Arrow What have been potential market failures resulting from health insurance? Search for providers shifted from consumers to insurers Dynamic moral hazard Information asymmetries still exist How to pick among physician groups or hospital networks? Reduces dynamic moral hazard if managed care lowers tech investments Increased expenditures resulting from access to new technologies Raises demand for health insurance, while at the same time making it more costly Increases in coverage leads to more technological developments (not usually costsaving) Glied on Dynamic Moral Hazard
“Technological improvements in the nature and quality of health care have made access to care more important and have driven increases in the cost of care. Better quality and higher cost care have precipitated the expansion in the extent and scope of private health insurance coverage and thus led to increased moral hazard . . . the existence of health insurance encourages the development and dissemination of costincreasing technologies. In the presence of insuranceinduced moral hazard, technology developers and providers compete to attract patients by choosing technologies that improve the quality of care. There is little reason to develop or choose technologies that lower costs.” EmployerBased Coverage EmployerBased Coverage
Tax subsidy results in majority of coverage via employer Roughly $700 billion spent on employer based coverage annually How regressive is system? Employers benefit from healthier workers Employees benefit from less missed work and group coverage (vs. individual) May create “job lock” ¾ from employer, ¼ from employee Percent of Firms Offering Health Benefits by Firm Size Percentage of All Workers Covered by Their Employers’ Health Benefits, in Firms Both Offering and Not Offering Health Benefits, by Firm Size, 19992010* *Tests found no statistical difference from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of EmployerSponsored Health Benefits, 19992010. Loyola Health Insurance Loyola Health Insurance Options Value to consumer of tax subsidy by Value to consumer of tax subsidy by family income level Value of Benefit based on Marginal Tax Rate Cost to Government of subsidies to Cost to Government of subsidies to health insurance via the tax system Equity (or lack thereof) of Tax Subsidy Equity (or lack thereof) of Tax Subsidy ...
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This note was uploaded on 04/14/2011 for the course ECON 329 taught by Professor Classen during the Spring '11 term at Loyola Chicago.
- Spring '11