Moral Hazard in Insurance Models

Mandatory Medicare coverage for hospital stays, skilled nursing, and hospice care.

Optional Medicare coverage for outpatient services, preventive care, and medical supplies.

An alternative Medicare option with private insurance companies, often affecting drug coverage.

Medicare coverage for prescription drugs and medications.

Medicare law replacing volume-based payment with value-based care, focusing on quality.

Medicare system rewarding providers for quality and efficient care.

When public programs like Medicaid expansion cause people to leave private insurance.

Government-funded program providing health insurance to low-income individuals and families.

This law emphasizes quality and efficiency in Medicare, replacing volume-based payments with value-based care.

This system rewards providers for delivering high-quality care efficiently within Medicare.

A market structure where a large firm sets prices, while smaller firms follow, acting as price takers.

The tendency for people to take more risks when they are insured, because they don't bear the full cost of those risks.

A view of moral hazard that acknowledges both efficient and inefficient behaviors. Efficient moral hazard involves seeking necessary care that improves health outcomes, while inefficient moral hazard involves unnecessary or frivolous care.

Individuals seeking necessary care that improves health outcomes, even if it appears expensive. This is seen as a positive outcome, as it leads to better health and possibly lower long-term costs.

Individuals using healthcare services unnecessarily or frivolously, simply because they have insurance. This results in wasted resources and higher costs overall.

The redistribution of funds from healthy individuals to those who experience costly medical events. This helps people in need access necessary care.

The Nyman model focuses on both efficient and inefficient moral hazard, recognizing the value of necessary care while acknowledging wasteful healthcare utilization. The conventional model mainly focuses on the negative aspects of inefficient moral hazard.

The balance between the potential loss of utility from paying premiums (money could be spent elsewhere) and the potential gain of utility from receiving financial relief in case of a medical emergency.

Nyman's model acknowledges both efficient and inefficient moral hazard, while the conventional model focuses mainly on the negative aspects of inefficient moral hazard.

A healthcare model that emphasizes efficient moral hazard, recognizing the value of necessary care while promoting universal access.

A supporter of healthcare systems that provide accessible and affordable care to everyone.

The Nyman model focuses on both efficient and inefficient moral hazard, recognizing the value of necessary care. The conventional model mainly focuses on the negative aspects of inefficient moral hazard.

Nyman's model aims to reduce costs for consumers by introducing subsidies and gatekeeping mechanisms to balance efficiency and fairness. It seeks to make healthcare more accessible while preventing abuse of the system.

By advocating for universal healthcare, Nyman's model aims to protect individuals from financial ruin by ensuring access to necessary care while making it more affordable.

A strategy where a firm sets a low price to discourage new competitors from entering the market by making entry unprofitable.

A market structure where a few firms dominate a specific market, often with high barriers to entry, making them mutually interdependent.

A type of oligopoly where firms cooperate, often secretly, to set prices or divide markets, leading to higher prices and reduced competition.

A type of oligopoly where firms actively compete with each other to lower prices, often to marginal cost, leading to higher output and efficient allocation of resources.

Oligopoly can lead to either collusion (joint profit maximization, higher prices, misallocation of resources) or competition (prices approach marginal cost, efficient allocation of resources).

Consequences of an activity that affect people not directly involved in it, like pollution from a factory affecting nearby residents.

Organizations that advocate for policies benefiting their members, often with a focus on specific industries or causes.

Policies are often influenced by powerful groups who can provide funding or votes, potentially leading to biased outcomes.

Policies can benefit a small, powerful group, while the costs are spread out among the general public.

Small, gradual policy changes are less likely to face strong public resistance.

The difference between the price a producer receives for a good and the minimum price they would be willing to sell it for. In a market with high producer surplus, producers gain significantly more than consumers.

The difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. In a market with low consumer surplus, consumers pay a higher price than they would like.

Obstacles that prevent new firms from entering a market. These can be legal (patents), economic (economies of scale), or regulatory (government restrictions).

A market structure with a single dominant buyer. This buyer dictates prices to suppliers, giving them significant power.

The National Health Service in the UK. It acts as a monopsony, negotiating prices for all medical care. This can control costs but also leads to lower physician wages and limited access to cutting-edge technology.

Walmart acts as a monopsony in certain industries by negotiating low prices from its suppliers. This dominance can influence the market and potentially create monopolistic conditions in its own sector.

When expansion of public insurance programs like Medicaid leads to a decrease in private insurance coverage.

Smaller companies in a market that follow the price set by the dominant firm.

Focusing on the quality and outcomes of healthcare, rather than just the quantity of services provided.