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Many economist point to moral hazard as the primary reason




Many economist point to moral hazard as the primary reason underlying rising health care costs in the US.;A) explain the general argument behind moral hazard;B) Explain the 5 ways in which moral hazard takes place (explain with a graph when possible).;The graph is my problem.;The 5 ways;1) at any point in time when an insured event takes place, the quantity demanded of medical services may exceed the amount the consumer would buy if she had to pay the full cost. Quantity demanded may be greater because the insured consumer faces a price that lies below the marginal cost of the medical service;2) the moral hazard problem may show up over time as consumer have less incentive to guard against an insured event. The paragraph goes on to talk about as the price of insurance increases, preventative measures decrease and illness rises and so does the consumption of medical services;3) moral hazard may from a third type of behavior that deals with technological advances. Third party payors may encourage low-benefit, high cost care which leades to increased demand for health insurance and increased range of services covered by the insurance;4) the consumer monitors the services provided less as the cost to the consumer decreases, thus unnecessary services occur;5) moral hazard occurs when insurance lowers the consumers incentive to shop around for medical services;Not sure if this makes sense, copied most of it out of the book so I don't misinterpret.;Let me know;Simone


Paper#28042 | Written in 18-Jul-2015

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