Question

According to the Oregon Health Insurance Experiment, what occurs to the supply and demand of health care services in the ER setting when everyone who needs Medicaid receives it (moral hazard)?

Answer 1

The mentioned experiment assessed the impact of health care services to those who won the lottery against those who lost the lottery and it observes group that won for Medicaid enrollment, had higher rate of visits to the facilities, increase in demand for the health care services, diabetic screening, less financial strain and less mental stress to people in the short run. But, in the long run of period 2 to 3 years, there was no significant difference between these two groups.

In the given scenario, when everyone is given the Medicaid enrollment, then it will increase the demand for the services as everyone would like to be assessed for existing disease or the expectation of occurrence of diseases in the future or preventing health care. It is due to the reason of moral hazard as people want to avail services as majority of the cost is to be paid up by the insurance companies. It will also cause increase in quantity supplied, as the demand for the services increases.