MORAL HAZARD AND THE DEMAND FOR HEALTH SERVICES: A MATCHING ESTIMATOR APPROACH

In this paper we estimate the impact of health insurance coverage beyond National Health Insurance on the demand for several health services. Traditionally, the literature has tried to deal with the endogeneity of the private (extra) insurance decision by finding instrumental variables. It is hard to think, however, of any variable that a priori would be a good instrument and, therefore, we take a different approach. We concentrate on the most common health insurance plan in the Portuguese Health Survey, (ADSE), which is given to all civil servants and their dependants. We argue that this insurance is exogenous for most people i.e. not correlated with their health status. Under this identifying assumption we estimate the impact of having ADSE coverage on three different health services using a matching estimator technique. The measures of demand for health services are number of visits, number of blood and urine tests, and the probability of visiting a dentist. Preliminary results show large effects of ADSE for number of visits and tests among the young (18 to 30 years old) but only for tests are these effects statistically significantly different from zero. The magnitude of the effects represent 21.8 and 30 percent of the average number of visits and tests for the young. On the contrary we find no evidence of moral hazard on the probability of visiting a dentist. Finally, we argue that there is evidence of a positive cumulative effect of ADSE over the years.