Adverse selection, moral hazard and the demand for Medigap insurance

Michael Keane () and Olena Stavrunova ()

Journal of Econometrics, 2016, vol. 190, issue 1, 62-78

Abstract: In this paper we study the adverse selection and moral hazard effects of Medicare supplemental insurance (Medigap). While both have been studied separately, this is the first paper to analyze them in a unified econometric framework. We find that adverse selection into Medigap is weak, but the moral hazard effect is substantial. On average, Medigap coverage increases health care spending by 24%, with especially large effects for relatively healthy individuals. These results have important policy implications. For instance, they imply that conventional remedies for inefficiencies created by adverse selection (e.g., mandatory enrollment) may lead to substantial health care cost increases.

Keywords: Health insurance; Health expenditures; Adverse selection; Moral hazard; Medicare; Medigap; Bayesian analysis; Missing data; Data fusion; Markov-chain Monte Carlo; Gibbs; Metropolis; Simultaneous equation model (search for similar items in EconPapers)
JEL-codes: C11 C15 C30 C63 D82 I11 I13 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Related works:
Working Paper: Adverse Selection, Moral Hazard and the Demand for Medigap Insurance (2014)
Working Paper: Adverse Selection, Moral Hazard and the Demand for Medigap Insurance (2012)
Working Paper: Adverse Selection, Moral Hazard and the Demand for Medigap Insurance (2011)
Working Paper: Adverse Selection, Moral Hazard and the Demand for Medigap Insurance (2011)
Working Paper: Adverse Selection, Moral Hazard and the Demand for Medigap Insurance (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:190:y:2016:i:1:p:62-78

DOI: 10.1016/j.jeconom.2015.08.002

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