Document Type
Article
Disciplines
Insurance Law
Abstract
Consumer-driven health care (CDHC) and health savings accounts (HSAs) have been promoted as ways to reduce national health expenditures. This essay attempts to place these policies in a theoretical perspective. CDHC is intended to reduce expenditures by reducing the additional quantity of health care that consumers purchase when insured, that is, by reducing moral hazard. This essay suggests that while some moral hazard is inefficient and should be discouraged, a large portion moral hazard-the health care that ill consumers can only afford to purchase if they are insured-is actually efficient and should be encouraged. CDHC does not distinguish between these two types of moral hazard, and therefore discourages the purchase of both efficient and inefficient moral hazard. It further suggests that savings accounts are less efficient than standard insurance coverage as vehicles for increasing the resources that are available to consumers who become ill. And finally, it suggests that quantity-reducing policies like CDHC are likely to be less effective in reducing health care expenditures than policies directed at bargaining down provider prices. Indeed, it is possible that CDHC would diffuse buying power and keep prices high. Because CDHC is unlikely to reduce the quantity of health care demanded substantially, national health care expenditures would likely remain high with CDHC.
Recommended Citation
Nyman, John A., "Consumer-Driven Health Care: Moral Hazard, the Efficiency of Income Transfers, and Market Power" (2006). Connecticut Insurance Law Journal. 183.
https://digitalcommons.lib.uconn.edu/cilj/183