Basic Versus Supplementary Health Insurance: Moral Hazard and Adverse Selection

21 Pages Posted: 14 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: October 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: adverse selection, cost effectiveness, moral hazard, public vs private insurance, universal basic health insurance, voluntary supplementary insurance

JEL Classification: D82, H51, I13

Suggested Citation

Boone, Jan, Basic Versus Supplementary Health Insurance: Moral Hazard and Adverse Selection (October 2014). CEPR Discussion Paper No. DP10199, Available at SSRN: https://ssrn.com/abstract=2510057

Jan Boone (Contact Author)

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

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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