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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.45) Commentary
Moral Hazard in Health Insurance

Jonathan Gruber

Columbia University Press

This chapter considers economics professor Jonathan Gruber's four points complementary to colleague Amy Finkelstein's lecture. His first point dwells on the significance of a provider-side moral hazard aside from what had been noted in Finkelstein's lecture. The concept of provider-side moral hazard is best described as a physician being paid according to the amount of care they deliver, rather than of the patient's progress towards improvement. Secondly, Gruber mulls over the issue of whether or not changing medical spending habits are due to moral hazard or liquidity effects. The likelihood of liquidity effects occurring is demonstrated when sick individuals are provided with enough money to undergo an expensive operation they would not take otherwise. Gruber also maintains that the affordability of medical care is also dependent on the income distribution. Finally, Gruber closes his discussion with the advantages and disadvantages of co-insurance in conjunction with the above points.

Keywords:   Jonathan Gruber, Amy Finkelstein, provider-side moral hazard, liquidity effects, income distribution, co-insurance

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