Moral Hazard in health care usually refers to the additional consumption of medical care by the insured relative to the uninsured; that is, as the price falls to zero, people consume more services.

1. Moral Hazard in health care usually refers to the additional consumption of medical care by the insured relative to the uninsured; that is, as the price falls to zero, people consume more services. Should all of the additional “insurance-related consumption be considered waste? why or why not?

2. The implication is that if we raise prices at the point of service, using deductibles and copayments, we can reduce consumption. Is it possible that we can reduce it too much?

3. To what extent can this strategy…Excepting certain kinds of primary care from deductibles and copayment…be adopted for other kinds of health care? are there “optimal” copayments for all medical procedures and service, ones that can discriminate between welfare enhancing versus welfare reducing moral hazard?

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