Disease Status and Health-Specific Moral Hazard Effects
- Presenter:
Chair: Richard Hirth; Discussant: Alan Monheit Tue June 6, 2006 13:45-15:15 Room 326
The effect of insurance on the demand for medical care depends on the marginal utility of health since medical care services are inputs to health production. Given that marginal utility of health is highly related to the consumer’s initial health, additional medical care used by the insured, i.e., the moral hazard, likely varies by health. This health-specific moral hazard may vary by dimension of health. A consumer may exhibit different actions in his/her decisions toward care associated with serious chronic conditions than toward care associated with less serious medical conditions. Consequently, the extent of the health-specific moral hazard may differ across medical care services associated with different disease states. Using a clinical classification code based on ICD-9-CM condition codes, this paper classifies medical care services by disease status in three groups: services associated with serious chronic conditions, services associated with acute conditions of any sort and minor chronic conditions, and services associated with no medical conditions. Using data from the Medical Expenditure Panel Survey and its Medical Conditions supplement, the paper examines the variation in the health-specific moral hazard across disease-specific medical care services. The paper illustrates that the welfare implications of health insurance depends on both the type of medical care service and the disease status associated with that service. The empirical analysis suggests that both efficient and inefficient moral hazard may exist depending on the disease status and type of care. These results may have implications for designing disease-specific insurance policies across medical care services.
