This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance policies. Such policies must make tradeoffs appropriately between risk sharing on the one hand and agency problems such as moral hazard (the incentive of people to seek more...

The nature, and normative properties, of competition in health care markets has long been the subject of much debate. In particular, policymakers have exhibited a great deal of reservation toward competition in health care markets, as demonstrated by the plethora of regulations governing the...

We explore the feasibility of catastrophic health insurance established in conjunction with individual health accounts (IHAs). Under this plan, the employer establishes both a high-deductible health insurance plan and an IHA. Employee health care costs below the deductible are then paid out of...

This paper shows that, except in certain limiting cases, competitive equilibrium with moral hazard is constrained inefficient. The first section compares the competitive equilibrium and the constrained social optimum in a fairly general model, and identifies types of market failure. Each of the...

Health insurance plans increasingly pay for expenses only beyond a large annual deductible. This paper explores the implications of deductibles that reset over shorter timespans. We develop a model of insurance demand between two actuarially equivalent deductible policies, in which one...

I aim to shed light on why emergency room (ER) utilization increased following the Oregon Health Insurance Experiment but decreased following a Massachusetts policy. To do so, I unite the literatures on insurance and treatment effects. Under an MTE model that assumes no more than the LATE...

We describe research on the impact of health insurance on healthcare spending ("moral hazard"), and use this context to illustrate the value of and important complementarities between different empirical approaches. One common approach is to emphasize a credible research design; we review...

Several past studies have found health risk to be negatively correlated with the probability of voluntary health insurance. This is contrary to what one would expect from standard textbook models of adverse selection and moral hazard. The two most common explanations to the counter-intuitive...

This paper illustrates the impact of moral hazard for estimating relative rates of underinsurance and to present an adjustment method to correct for this source of bias. Individuals or households are often classified as underinsured if out-of-pocket spending on medical care relative to income...

As an empirical example of this externality, we analyze the innovation induced by the obesity epidemic. Obesity is associated with an increase in the incidence of many diseases. The induced innovation hypothesis is that an increase in the incidence of a disease will increase technological...