Question

What is the moral hazard created by using health insurance to ensure access to health care goods and services? What are the negative outcomes (prices, overall health expenditures, the quantity of needed versus discretionary goods and services) of not addressing this moral hazard?

Answer 1

When it comes to health insurance, moral hazard can be seen to understand the concept of insurance coverage. This indicates that when the marginal cost of care to the various individual is reduced, it will result in increased healthcare utilization. This can be seen as the added purchasing of healthcare when a certain individual becomes insured. In the opinion of health economists, this kind of purchase of health insurance is inefficient as the worth of these cares is less for the consumers in comparison to the cost incurred in the production of these cares.

If the moral hazard in health care is not addressed effectively, it will have a negative consequence on the price of healthcare as due to increased demand, the price of the health care service will increase and the companies will have to pay more. Due to the increased cost of health care, the overall expenditure on health care will increase and thus the government has to allocate more funds by cutting funds on other sectors. As more people will look to have more healthcare services as they got the insurance, this will create a situation in which the actual demand of the health care service will be shadowed by the artificial demand that is the people will start using these services without any medical reasons but to use their funds or service provided free f cast