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The price elasticity of demand for health care is often thought of as a measure of ex post moral hazard , which roughly captures the
The price elasticity of demand for health care is often thought of as a measure of ex post moral hazard, which roughly captures the extent of overuse of medical care. Health insurance causes the spot price of health carethat which the person actually must payto fall, which leads to an increase in health care usage. This type of moral hazard creates a type of inefficiencymore health care is used than is valued by individuals. Based on the results from the RAND Health Insurance Experiment, discuss the following questions with your classmates:
- How does the magnitude of moral hazard vary by inpatient vs. outpatient care?
- Do you think that the results from RAND, which are from the 1970s, would hold true today? Why or why not?
- The lack of any finding with respect to actual health in the RAND study is surprising. Can you offer any theories that may explain this lack?
- How do you think the price elasticity of demand for basic physician care has changed as a result of COVID-19? What about specialist care?
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