Çağatay Koç

Health-Specific Moral Hazard Effects

In this paper I examine the effect of insurance on the demand for health care among consumers of similar health, which I call the health-specific moral hazard effect. Using the 2000 Medical Expenditure Panel Survey, I analyze the variation in the moral hazard effect across health subpopulations in the demand for inpatient and outpatient services. The endogeneity of insurance, the change of insurance regime, and the discreteness and the nonnegativity of the use of health care motivate the use of an endogenous switching model for count data. The econometric results indicate that the moral hazard effect for physician visits is higher at relatively higher levels of health, whereas the effect for both hospital nights and hospital admissions is lower at relatively higher levels of health. The evidence suggests that both efficient and inefficient moral hazard may exist, and this may depend on the type of health care service used.

Implications of the Interaction Between Insurance Choice and Medical Care Demand

The gross price elasticity of demand for medical care is decomposed into two separate observable components: the medical care gross price elasticity of insurance choice and the cost‐sharing elasticity of medical care. When consumers alter their choice of health‐care plans, the price elasticity of medical care is no longer equivalent to the cost‐sharing elasticity; using the latter as a proxy for the former may produce misleading results. We present conditions under which the medical care price elasticity is positive, the case of a quasi‐Giffen good, and provide a theoretical foundation for extant empirical findings of a positive medical care price elasticity of insurance demand.

Disease-Specific Moral Hazard and Optimal Health Insurance Design for Physician Services

This article analyzes disease-specific moral hazard effects in the demand for physician office visits and explores whether optimal insurance for physician services should be designed to have disease-specific cost sharing. Generalized method of moments is implemented to address the endogeneity of private health insurance, and the nonnegativity and the discreteness of physician services use. The results indicate that the moral hazard effect varies considerably across disease-specific specialist care. The strongest moral hazard (for no-condition related specialist visits) is almost twice the moral hazard effect of the weakest (for chronic condition related specialist visits). Although the findings indicate some variation in the moral hazard effect across disease-specific general practitioner visits, the variation is less considerable. The main policy implication is that optimal insurance for physician services should be designed to have differential cost sharing based on disease status rather than to have uniform cost sharing.