Basic versus Supplementary Health Insurance: Moral Hazard and Adverse Selection

CentER Discussion Paper No. 2014-059

TILEC Discussion Paper No. 2014-034

20 Pages Posted: 7 Oct 2014

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Multiple version iconThere are 2 versions of this paper

Date Written: September 2, 2014

Abstract

This paper introduces a tractable model of health insurance with both moral hazard and adverse selection. We show that government sponsored universal basic insurance should cover treatments with the biggest adverse selection problems. Treatments not covered by basic insurance can be covered on the private supplementary insurance market. Surprisingly, the cost effectiveness of a treatment does not affect its priority to be covered by basic insurance.

Keywords: universal basic health insurance, voluntary supplementary insurance, public vs private insurance, adverse selection, moral hazard, cost effectiveness

JEL Classification: I13, D82, H51

Suggested Citation

Boone, Jan, Basic versus Supplementary Health Insurance: Moral Hazard and Adverse Selection (September 2, 2014). CentER Discussion Paper No. 2014-059, TILEC Discussion Paper No. 2014-034, Available at SSRN: https://ssrn.com/abstract=2505955 or http://dx.doi.org/10.2139/ssrn.2505955

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

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+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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