Abstract
Basic economic theory suggests that health insurance coverage may cause a reduction in prevention activities, but empirical studies have yet to provide much evidence to support this prediction. However, in other insurance contexts that involve adverse health events, evidence of ex ante moral hazard is more consistent. In this paper, we extend the analysis of the effect of health insurance on health behaviors by allowing for the possibility that health insurance has a direct (ex ante moral hazard) and indirect effect on health behaviors. The indirect effect works through changes in health promotion information and the probability of illness that may be a byproduct of insurance-induced greater contact with medical professionals. We identify these two effects and in doing so identify the pure ex ante moral hazard effect. This study exploits the plausibly exogenous variation in health insurance as a result of obtaining Medicare coverage at age 65. We find evidence that obtaining health insurance reduces prevention and increases unhealthy behaviors among elderly men. We also find evidence that physician counseling is successful in changing health behaviors.
Similar content being viewed by others
References
Broder, J. (2002, November 25). Problem of lost health benefits is reaching into the middle class. New York Times.
Brown M., Bindman A.B., Lurie N. (1998) Monitoring the consequences of uninsurance: A review of methodologies. Medical Care Research and Review 55(2): 177–210. doi:10.1177/107755879805500203
Bull F.C., Jamrozik K. (1998) Advice on exercise from a family physician can help sedentary patients to become active—a survey of US family practitioners. American Journal of Preventive Medicine 15(2): 85–94. doi:10.1016/S0749-3797(98)00040-3
Card D., Dobkin C., Maestas N. (2008) The impact of nearly universal insurance coverage on health care utilization and health: Evidence from Medicare. The American Economic Review 98(5): 2242–2258
Chiappori, P. A. (2000). Econometric models of insurance under asymmetric information. In G. Dionne (Ed.), Handbook of insurance. North Holland.
Cohen A., Dehejia R. (2004) The effect of automobile insurance and accident liability laws on traffic fatalities. The Journal of Law & Economics 47(2): 357–393. doi:10.1086/422978
Courbage C., Coulon A. (2004) Prevention and private health insurance in the U.K.. Geneva Papers on Risk and Insurance: Issues and Practice 29(4): 719–727. doi:10.1111/j.1468-0440.2004.00313.x
Currie J., Gruber J. (1996) Saving babies: The efficacy and cost of recent changes in the Medicaid eligibility of pregnant women. The Journal of Political Economy 104(6): 1263–1296. doi:10.1086/262059
Cutler, D. M., & Zeckhauser, R. (2000). Insurance markets and adverse selection. In A. J. Cutler & J. P. Newhouse (Eds.), Handbook of health economics. North Holland.
Decker S. (2005) Medicare and the health of women with breast cancer. The Journal of Human Resources 40(4): 948–968
Doescher M.P., Saver B. (2000) Physicians’ advice to quit smoking. The glass remains half empty. The Journal of Family Practice 49(6): 543–547
Ehrlich I., Becker G. (1972) Market insurance, self-insurance, and self-protection. The Journal of Political Economy 80(4): 623–648. doi:10.1086/259916
Elley C.R., Keres N., Arroll B., Robinson E. (2003) Effectiveness of counselling patients on physical activity in general practice: cluster randomised controlled trial. British Medical Journal 326: 793–799. doi:10.1136/bmj.326.7393.793
Fortin, B., & Lanoie, P. (2000). Incentive effects of worker’s compensation: A survey. In G. Dionne (Ed.), Handbook of insurance. North Holland.
Frank E., Winkleby M., Altman D., Rockhill B., Fortmann S. (1991) Predictors of physician’s smoking cessation advice. Journal of the American Medical Association 266(22): 3139–3144. doi:10.1001/jama.266.22.3139
Kaestner R., Carroll A. (1997) New estimates of the labor market effects of workers’ compensation insurance. Southern Economic Journal 63(3): 635–651. doi:10.2307/1061099
Kaestner R., Joyce T., Racine A. (2001) Medicaid eligibility and the incidence of ambulatory care sensitive hospitalizations for children. Social Science & Medicine 52: 305–313. doi:10.1016/S0277-9536(00)00133-7
Kaestner R., Racine A., Joyce T. (2000) Did recent expansions in Medicaid narrow socioeconomic differences in hospitalization rates of infants?. Medical Care 38(2): 195–206. doi:10.1097/00005650-200002000-00009
Kenkel, D. S. (2000). Prevention. In A. J. Culyer & J. P. Newhouse (Eds.), Handbook of health economics. North Holland.
Klick, J., & Stratmann, T. (2004). Diabetes treatments and moral hazard. FSU College of Law, Law and Economics Paper No. 05-21 Available at SSRN: http://ssrn.com/abstract=766825.
Lancaster T., Stead L. (2004) Physician advice for smoking cessation. Cochrane Database of Systematic Reviews (Online: Update Software) 18(4): CD000165
Levy, H., & Meltzer, D. (2004). What do we really know about how health insurance affects health? In C. McLaughlin (Ed.), Health policy and the uninsured. Urban Institute Press.
Lilliard, L. A., Manning, W. G., Peterson, C. E., Lurie, N., Goldberg, G., & Phelps, C. E. (1986). Preventive medical care: Standards, usage and efficacy. Santa Monica, CA: Rand Publication Services, Report No. R3266-HCFA.
McWilliams M., Zaslavsky A.M., Meara E., Ayanian J. (2003) Impact of Medicare coverage on basic clinical services for previously uninsured adults. Journal of the American Medical Association 290: 757–764. doi:10.1001/jama.290.6.757
Mundt P., French T., Roebuck C., Manwell B., Barry L. (2005) Brief physician advice for problem drinking among older adults: An economic analysis of costs and benefits. Journal of Studies on Alcohol 66(3): 389–394
Newhouse, J. P. (1993). Free for all? Lessons from the RAND health insurance experiment. In A RAND study. Cambridge, London: Harvard University Press.
Ruser J.W. (1985) Workers’ compensation insurance, experience-rating, and occupational injuries. The Rand Journal of Economics 16(4): 487–503. doi:10.2307/2555508
Ruser J.W. (1991) Workers’ compensation and occupational injuries and illnesses. Journal of Labor Economics 9(4): 325–350. doi:10.1086/298272
US Preventive Services Task Forces. (2002). Behavioral counseling to promote physical activity. Report of the US Preventive Services Task Force, US Department of Health and Human Services.
US Preventive Services Task Forces. (2003). Counseling for a healthy diet. Report of the US Preventive Services Task Force, US Department of Health and Human Services.
US Preventive Services Task Forces. (2004). Screening and behavioral counseling interventions in primary care to reduce alcohol misuse. Report of the US Preventive Services Task Force, US Department of Health and Human Services.
Viscusi W. (1995) Discounting health effects for medical decisions. In: Sloan F. (eds) Valuing health care: Costs, benefits, and effectiveness of pharmaceuticals and other medical technologies. Cambridge University Press, Cambridge
Whitlock P., Michael P., Carla G., Tracy O., Jonathan K. (2004) Behavioral counseling interventions in primary care to reduce risky/harmful alcohol use by adults: A summary of the evidence for the U.S. Preventive Services Task Force. Annals of Internal Medicine 140(7): 557–568
Wooldridge J. (2001) Econometric analyses of cross-section and panel data. MIT Press, Cambridge
Young J.M., Ward J.E. (1998) Influence of physician and patient gender on provision of smoking cessation advice in general practice. Tobacco Control 7: 360–363. doi:10.1136/tc.7.4.360
Zweifel, P., & Manning, G. (2000). Moral hazard and consumer incentives in health care. In A. J. Culyer & J. P. Newhouse (Eds.), Handbook of health economic. North-Holland.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Dave, D., Kaestner, R. Health insurance and ex ante moral hazard: evidence from Medicare. Int J Health Care Finance Econ 9, 367–390 (2009). https://doi.org/10.1007/s10754-009-9056-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10754-009-9056-4