Adverse selection, moral hazard and the demand for Medigap insurance

Publication Type:
Journal Article
Citation:
Journal of Econometrics, 2016, 190 (1), pp. 62 - 78
Issue Date:
2016-01-01
Metrics:
Full metadata record
Files in This Item:
Filename Description Size
1-s2.0-S0304407615002225-main.pdfPublished Version529.98 kB
Adobe PDF
© 2015 Elsevier B.V. In this paper we study the adverse selection and moral hazard effects of Medicare supplemental insurance (Medigap). While both have been studied separately, this is the first paper to analyze them in a unified econometric framework. We find that adverse selection into Medigap is weak, but the moral hazard effect is substantial. On average, Medigap coverage increases health care spending by 24%, with especially large effects for relatively healthy individuals. These results have important policy implications. For instance, they imply that conventional remedies for inefficiencies created by adverse selection (e.g., mandatory enrollment) may lead to substantial health care cost increases.
Please use this identifier to cite or link to this item: