Use your understanding of Moral Hazard and Adverse selection to analyze the impact of the Affordable Care Act (ACA) related to: (Definitions of Moral Hazard & Adverse Selection are below)

a). The Expansion of Medicaid coverage

Moral hazard refers to the insured party indulging in risks or taking less care about the acts against which the party is insured or protected against. For example, after getting insurance for the owner may not or care less about keeping the keys safe, also driving rash after getting accidental insurance. Similarly, this can be further seen in situations when uninsured populations have equal health outcomes or better then the insurance populations.

Adverse selection refers generallyto a situation in which sellers have information that buyers do not have, or vice versa, about some aspect of product qualityin other words, it is a case where asymmetric information is exploited. Asymmetric information, also called information failure, happens when one party to a transaction has greater material knowledge than the other party. In healthinsurance happens when sicker people, or those who present a higher risk to the insurer, buyhealthinsurance while healthier people don't buy it.Adverse selectionputs the insurer at a higher risk of losing money through claims than it had predicted when a party does not have enough information about the product quality he is going to buy. At times with adverse selection only the seller or medical professional knows the true quality of the product and buyer or patient doesn't. In this case the buyer is unsure of the quality of the product he buys.