Moral Hazard in Health Insurance: Do Dynamic Incentives Matter?

Aviva Aron-Dine (), Liran Einav, Amy Finkelstein () and Mark Cullen ()
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Aviva Aron-Dine: Office of Management and Budget
Amy Finkelstein: Massachusetts Institute of Technology
Mark Cullen: Stanford School of Medicine

The Review of Economics and Statistics, 2015, vol. 97, issue 4, 725-741

Abstract: Using data from employer-provided health insurance and Medicare Part D, we investigate whether health care utilization responds to the dynamic incentives created by the nonlinear nature of health insurance contracts. We exploit the fact that because annual coverage usually resets every January, individuals who join a plan later in the year face the same initial (“spot”) price of health care but a higher expected end-of-year (“future”) price. We find a statistically significant response of initial utilization to the future price, rejecting the null that individuals respond only to the spot price. We discuss implications for analysis of moral hazard in health insurance.

Keywords: health insurance; moral hazard; dynamic incentives (search for similar items in EconPapers)
JEL-codes: D12 G22 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (86)

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