1 option
Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second Best in Health Care Markets / Martin Gaynor, Deborah Haas-Wilson, William B. Vogt.
- Format:
- Book
- Author/Creator:
- Gaynor, Martin.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w6865.
- NBER working paper series no. w6865
- Language:
- English
- Subjects (All):
- Health insurance.
- Medical care, Cost of.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1998.
- Cambridge, Massachusetts : National Bureau of Economic Research, 1998.
- Summary:
- The nature, and normative properties, of competition in health care markets has long been the subject of much debate. In particular, policymakers have exhibited a great deal of reservation toward competition in health care markets, as demonstrated by the plethora of regulations governing the health care sector. Currently, as consolidation rapidly occurs in health care markets, concern about reduced competition has arisen. This concern, however, cannot be properly evaluated without a normative standard. In this paper we consider what the optimal benchmark is in the presence of moral hazard effects on consumption due to health insurance. Moral hazard is widely recognized as one of the most important distortions in health care markets. Moral hazard due to health insurance leads to excess consumption, therefore it is not obvious that competition is second best optimal given this distortion. Intuitively, it seems that imperfect competition in the health care market may constrain this moral hazard by increasing prices. We show that this intuition cannot be correct if insurance markets are competitive. A competitive insurance market will always produce a contract that leaves consumers at least as well off under lower prices as under higher prices. Thus, imperfect competition in health care markets can not have efficiency enhancing effects if the only distortion is due to moral hazard.
- Notes:
- Print version record
- December 1998.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.