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Moral Hazard in Health Insurance$
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Amy Finkelstein

Print publication date: 2014

Print ISBN-13: 9780231163804

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231163804.001.0001

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(p.1) Introduction
Moral Hazard in Health Insurance

Joseph P. Newhouse

Columbia University Press

The introduction analyzes the highly influential article “Uncertainty and the Welfare Economics of Medical Care,” by economist Kenneth J. Arrow. According to Arrow, there have been growing clinical capabilities of medical care as well as the acceleration of medical care's claims on the economy's resources. Arrow argues that the resources for medical markets cannot insure all medical risks, and that there is uncertainty of medical information about costs and benefits. An example would be when a patient seeks information from a physician yet the information about medical contingencies as well as the corresponding payments for these contingencies is impossible to acquire. This chapter considers economic arguments in two different medical care literatures: firstly, the effects of selection in individual or small-group insurance markets, and secondly, moral hazards.

Keywords:   Kenneth J. Arrow, medical care, Uncertainty and the Welfare Economics of Medical Care, medical markets, small-group insurance markets, moral hazards

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