Health insurance and ex ante moral hazard: evidence from Medicare

Basic economic theory suggests that health insurance coverage may cause a reduction in prevention activities, but empirical studies have yet to provide much evidence to support this prediction. However, in other insurance contexts that involve adverse health events, evidence of ex ante moral hazard is more consistent. In this paper, we extend the analysis of the effect of health insurance on health behaviors by allowing for the possibility that health insurance has a direct (ex ante moral hazard) and indirect effect on health behaviors. The indirect effect works through changes in health promotion information and the probability of illness that may be a byproduct of insurance-induced greater contact with medical professionals. We identify these two effects and in doing so identify the pure ex ante moral hazard effect. This study exploits the plausibly exogenous variation in health insurance as a result of obtaining Medicare coverage at age 65. We find evidence that obtaining health insurance reduces prevention and increases unhealthy behaviors among elderly men. We also find evidence that physician counseling is successful in changing health behaviors.     

Moral hazard and selection among the poor: evidence from a randomized experiment

Not only does economic theory predict high-risk individuals to be more likely to purchase insurance, but insurance coverage is also thought to crowd out precautionary activities. In spite of stark theoretical predictions, there is conflicting empirical evidence on adverse selection, and evidence on ex ante moral hazard is very scarce. Using data from the Seguro Popular Experiment in Mexico, this paper documents patterns of selection on observables into health insurance as well as the existence of non-negligible ex ante moral hazard. More specifically, the findings indicate that (i) agents in poor self-assessed health prior to the intervention have, all else equal, a higher propensity to take up insurance; and (ii) insurance coverage reduces the demand for self-protection in the form of preventive care. Curiously, however, individuals do not sort based on objective measures of their health.     

Health insurance reform and retirement: Evidence from the Affordable Care Act

The Affordable Care Act (ACA) has provided millions of Americans with medical insurance but may have led to an increase in retirement among older individuals who are utilizing the newly available coverage options as a substitute for employer‐provided insurance. Using data from the American Community Survey from 2009–2016, this hypothesis is tested by estimating the effect of the premium subsidies and Medicaid expansions of the ACA on retirement transitions for the non‐Medicare eligible cohort of older Americans aged 55–64. Research results indicate a 2% and 8% decrease in labor force participation resulting from the premium subsidies and Medicaid expansions, respectively. Slightly larger estimates are found among a subgroup of adult couples. The study also finds suggestive evidence of crowd‐out of employer‐sponsored insurance by subsidized marketplace plans but finds no such effects from the Medicaid expansions.     

Preconception subsidized insurance: Prenatal care and birth outcomes by race/ethnicity

Low‐income pregnant women have been Medicaid eligible since the 1980s, but the Affordable Care Act (ACA)'s expansion of Medicaid to women preconception has the potential to improve pregnancy and birth outcomes by removing delays in Medicaid enrollment. More substantially, the ACA expanded subsidized nongroup maternity coverage. Pre‐ACA, nongroup health insurance had generally excluded maternity coverage and was prohibitively expensive for low‐income individuals, but the ACA's creation of the Marketplace made maternity coverage mandatory and provides income‐based subsidies. I use a simulated eligibility approach to measure how these two aspects of the ACA impacted pregnancy and birth outcomes for first‐time mothers, paying special attention to racial‐ethnic differences. I find expanding Medicaid to women prior to pregnancy significantly improves the share of women with a prenatal care visit in the first trimester for non‐Hispanic Whites and Blacks. Expansions in non‐Medicaid subsidized insurance, such as Marketplace insurance, significantly reduce the share of births paid by Medicaid and increased breastfeeding across all racial and ethnic groups. Neither type of subsidized insurance had significant, robust impacts on birth outcomes.     

The other ex ante moral hazard in health

It is well-known that pooled insurance coverage can induce people to make inefficiently low investments in self-protective activities. We identify another ex ante moral hazard that runs in the opposite direction. Lower levels of self-protection and the associated chronic conditions and behavioral patterns such as obesity, smoking, and malnutrition increase the incidence of many diseases and consumption of treatments to those diseases. This increases the reward for innovation and thus benefits the innovator. It also increases treatment innovation which benefits all consumers. As individuals do not take these positive externalities into account, their investments in self-protection are inefficiently high. We quantify the lower bound of this externality for obesity. The lower bound is independent of how much additional innovation is generated. The results show that the externality we identify offsets the negative Medicare-induced insurance externality of obesity. The Medicare-induced obesity subsidy is thus not a sufficient rationale for "soda taxes", "fat taxes" or other penalties on obesity. The quantitative finding also implies that the other ex ante moral hazard that we identify can be as important as the ex ante moral hazard that has been a central concept in health economics for decades.     

The Affordable Care Act's insurance market regulations' effect on coverage

Much of the debate surrounding reform of the Patient Protection and Affordable Care Act (ACA) revolves around its insurance market regulation. This paper studies the impact on health insurance coverage of those provisions. Using data from the American Community Survey, years 2008–2015, I focus on individuals, ages 26 to 64, who are ineligible for the subsidies or Medicaid expansions included in the ACA to isolate the effect of its market regulation. To account for time trends, I utilize a differences‐in‐differences approach with a control group of residents of Massachusetts who were already subject to a similarly regulated health insurance market. I find that the ACA's regulations caused an increase of 0.95 percentage points in health insurance coverage for my sample in 2014. This increase was concentrated among younger individuals, suggesting that the law's regulations ameliorated adverse selection in the individual health insurance market.     

Medicaid and crowding out of private insurance: a re-examination using firm level data

While previous research has identified a relationship between expanded Medicaid eligibility and falling private health insurance coverage, the exact mechanism by which this "crowding out" occurs is largely unexplained. We combine individual and firm-level data to investigate possible responses to the Medicaid expansions by firms and workers. We find no evidence that the expansions affected employer offers of insurance to workers. However, we find some evidence of an effect on the probability that a firm offers family coverage, and on the percentage of full-time workers accepting employer-sponsored coverage offered to them.     

Optimal health insurance for prevention and treatment

This paper reexamines the efficiency-based arguments for optimal health insurance, extending the classic analysis to consider optimal coverage for prevention and treatment separately. Our paper considers the tradeoff between individuals' risk reduction on the one hand, and both ex ante and ex post moral hazard on the other. We demonstrate that it is always desirable to offer at least some insurance coverage for preventive care if individual consumers ignore the impact of their preventive care on the health premium. Using a utility-based framework, we reconfirm the conventional tradeoff between risk avoidance (by risk sharing) and moral hazard for insuring treatment goods. Uncompensated losses that reduce effective income provide a new efficiency-based argument for more generous insurance coverage for prevention and treatment of health conditions. The optimal coinsurance rates for prevention and for treatment are not identical.     

Expanding public health insurance to parents: effects on children's coverage under Medicaid

OBJECTIVE: To assess whether expanding public health insurance coverage to parents leads to increases in Medicaid participation among children. DATA SOURCES/STUDY SETTING: Study uses data from the 1997 and 1999 National Survey of America's Families. Insurance coverage of children eligible for Medicaid under the poverty-related expansions is analyzed. STUDY DESIGN: We conduct two analyses. In the first, we examine the cross-sectional difference regarding whether Medicaid participation is higher for children eligible for Medicaid under the poverty-related expansions when states expand public health insurance programs to cover their parents. In the second, we use a difference-in-difference approach to assess whether the expansion of the Medicaid program to cover parents in Massachusetts led to an increase in Medicaid coverage among children between 1997 and 1999 relative to changes that occurred in the rest of the nation. DATA COLLECTION/EXTRACTION METHODS: The analysis relies on a detailed Medicaid and SCHIP eligibility simulation model that identifies children surveyed on the NSAF who are eligible for Medicaid under the poverty-related expansions. PRINCIPAL FINDINGS: Children who reside in states that expanded public health insurance programs to parents participate in Medicaid at a rate that is 20 percentage points higher than of those who live in states with no expansions. The Massachusetts expansion in coverage to parents led to a 14 percentage point increase in Medicaid coverage among children due principally to reductions in uninsurance among already eligible children. CONCLUSIONS: Expanding public health insurance coverage to parents has benefits to children in the form of increased participation in Medicaid.     

Access to care and health insurance coverage for workers with disabilities: Outcomes by state-level responses to the ACA

BackgroundStates had flexibility in their implementation of the Patient Protection and Affordable Care Act (ACA) Medicaid expansions, which may have led to variation in coverage and changes in access to care for workers with disabilities.Objective/hypothesisTo examine differential trends in health insurance coverage and access to care among workers with disabilities by states’ decisions about expanding Medicaid under the ACA.MethodsWe aggregated data from the National Health Interview Survey into groups by time period relative to ACA implementation: pre-ACA (2006–2009), early ACA (2010–2013), and later ACA (2014–2017). We produced health insurance and access statistics for each time period, by state-level Medicaid expansion status.ResultsUninsurance rates decreased after 2014 in all states, regardless of the state’s decision whether to expand Medicaid. There was a substantial increase after 2014 in the share of workers with disabilities covered by Medicaid in states that expanded in that year; in other states, workers with disabilities experienced larger increases in privately purchased coverage. At the same time, the share of workers with disabilities reporting cost-related barriers to care declined markedly in 2014 Medicaid expansion states, but it increased slightly in the non-expansion states. Structural barriers to accessing care increased in all states, with the smallest increase in 2014 expansion states.ConclusionsMedicaid coverage and cost-related access to care improved significantly among workers with disabilities in 2014 Medicaid expansion states, both overall and relative to workers with disabilities in non-expansion states.     

Medicaid,family spending,and the financial implications of crowd-out

A primary purpose of health insurance is to protect families from medical expenditure risk. Despite this goal and despite the fact that research has found that Medicaid can crowd out private coverage, little is known about the effect of Medicaid on families’ spending patterns. This paper implements a simulated instrumental variables strategy with data from the Consumer Expenditure Survey to estimate the effect of an additional family member becoming eligible for Medicaid on family-level health insurance coverage and spending. The results indicate that an additional family member becoming eligible for Medicaid increases the number of people in the family with Medicaid coverage by about 0.135–0.142 and decreases the likelihood that a family has any medical spending in a quarter by 2.7 percentage points. As previous research often finds with different data sets, I find evidence that Medicaid expansions crowd out some private coverage. Unlike most other data sets, the Consumer Expenditure Survey allows for considering the financial implications of crowd-out. The results indicate that families that transition from private coverage to Medicaid are able to spend significantly less on health insurance expenses, meaning Medicaid expansions can be welfare improving for families even when crowd-out occurs.     

Not‐for‐profit hospitals and Affordable Care Act: Navigating the new health care landscape

On a sunny Thursday morning, June 25, 2015, President Obama strode into the Rose Garden and declared a victory for the Affordable Care Act (ACA) by stating that the act was working exactly the way it was supposed to work. He further reinforced that ACA has enabled young Americans up to the age of 26 to remain on their parents’ health plans. It disallows the insurance companies from denying coverage based on preexisting conditions. Above all, an expansion of Medicaid has also brought an additional 16 million Americans under health coverage in a span of less than 2 years. The ACA went into full effect on January 1, 2014, ushering in health insurance reforms and new health coverage options across the country. 1 As the states expand Medicaid and provide new coverage options through the federal health insurance marketplace, they are busy streamlining application and enrollment processes for coverage programs. This article highlights the positive impact of the ACA on uninsured and the challenges that not‐for‐profit and public hospitals are facing as they navigate the new health care landscape.     

The effect of Medicaid eligibility expansions on fertility

In the United States, pregnant women and children’s eligibility for Medicaid was expanded dramatically during the 1980s and early 1990s. By lowering pregnancy and child health care costs, the Medicaid expansions may have increased the incentives for women to have children. To investigate this possibility, we examine whether state-level birth and abortion rates are related to the extent of states’ Medicaid eligibility expansions and the fraction of women eligible for Medicaid, controlling for economic and demographic factors, during the period 1982 to 1996. We examine birth rates by race, marital status and education as well as overall abortion rates. We find little evidence that the Medicaid expansions led to changes in birth rates or abortion rates. However, some results do suggest that the Medicaid expansions boosted the birth rate among white women who have not completed high school. We find that restrictions on Medicaid funding of abortions decrease abortion rates and increase birth rates. The results thus do not provide definitive evidence that expansions in public health insurance eligibility have sizable effects on women’s fertility.     

How Much Do Outside Options Matter? The Effect of Subsidized Health Insurance on Social Security Disability Insurance Benefit Receipt

New government health insurance programs may affect participation in existing safety-net benefits that provide health insurance as a secondary aim. We examine whether the outside options for health insurance made available by the Affordable Care Act affected Social Security Disability Insurance (DI) application decisions. Using the universe of U.S. individual income tax records spanning 2007-2016, we first estimate the effect of Medicaid expansions using a state difference-in-differences identification strategy, but find small and statistically insignificant estimates. However, when we estimate the effect of being eligible for high vs. low Marketplace subsidies based on geography, we find some evidence consistent with subsidies increasing DI claiming among those with prior access to Employer Sponsored Insurance, and decreasing DI claiming otherwise. Overall, we find suggestive evidence that outside options for health insurance do matter, though magnitudes are small and results are statistically precise only for Marketplace coverage.     

Adverse selection, moral hazard, and wealth effects in the Medigap insurance market

Using data from a longitudinal study of the recently retired we attempt to separate the moral hazard effect of Medicare supplementary (Medigap) insurance on health care expenditures from the adverse selection effect of poor health on Medigap coverage. We find evidence of adverse selection, but its magnitude is unlikely to create serious efficiency problems. Taking adverse selection into account reduces the estimate of the moral hazard effect. In addition, we find a strong positive wealth effect on the demand for supplementary insurance.     

Health insurance and opioid deaths: Evidence from the Affordable Care Act young adult provision

The concurrence of health insurance expansion under the Affordable Care Act (ACA) and increasing opioid‐related mortality has led to debate whether insurance increases or decreases opioid deaths. I use the introduction of the ACA young adult (YA) provision as a quasi‐experiment and utilize the resulting policy‐induced variation across states over time in YA access to insurance to study the effect of coverage on opioid‐related mortality. I rely on the share of state populations which stood to gain insurance before the ACA to perform a dose–response analysis, and find that the YA provision reduced opioid‐related mortality. The analysis suggests that 1 percentage point more coverage reduced opioid mortality among YA by 2.5/100,000 or 19.8%.     

Has public health insurance for older children reduced disparities in access to care and health outcomes?

This paper investigates the effects of expanding public health insurance eligibility for older children. Using data from the National Health Interview Surveys from 1986 to 2005, we first show that although income continues to be an important predictor of children's health status, the importance of income for predicting health has fallen for children 9-17 in recent years. We then investigate the extent to which the dramatic expansions in public health insurance coverage for these children in the past decade are responsible for the decline in the importance of income. We find that while eligibility for public health insurance unambiguously improves current utilization of preventive care, it has little effect on current health status. However, we find some evidence that Medicaid eligibility in early childhood has positive effects on future health. This may indicate that adequate medical care early on puts children on a better health trajectory, resulting in better health as they grow.     

Healthy,wealthy and insured? The role of self‐assessed health in the demand for private health insurance

Both adverse selection and moral hazard models predict a positive relationship between risk and insurance; yet the most common finding in empirical studies of insurance is that of a negative correlation. In this paper, we investigate the relationship between ex ante risk and private health insurance using Australian data. The institutional features of the Australian system make the effects of asymmetric information more readily identifiable than in most other countries. We find a strong positive association between self-assessed health and private health cover. By applying the Lokshin and Ravallion (J. Econ. Behav. Organ 2005; 56:141-172) technique we identify the factors responsible for this result and recover the conventional negative relationship predicted by adverse selection when using more objective indicators of health. Our results also provide support for the hypothesis that self-assessed health captures individual traits not necessarily related to risk of health expenditures, in particular, attitudes towards risk. Specifically, we find that those persons who engage in risk-taking behaviours are simultaneously less likely to be in good health and less likely to buy insurance.     

Effects of the Medicaid expansion under the Affordable Care Act on health insurance coverage,health care access,and use for people with disabilities

BackgroundPeople with disabilities have higher health care needs, service utilization, and expenditures. They are also more likely to lack insurance and experience unmet need for medical care. There has been limited research on the effects of the Affordable Care Act Medicaid expansion on people with disabilities.ObjectiveTo examine the effects of the Medicaid expansion on health insurance coverage, access, and service use for working-age adults with disabilities.MethodsA retrospective study using 11 years (2007–2017) of data from the Medical Expenditure Panel Survey - Household Components, linked to Area Health Resource Files and Local Area Unemployment Statistics (N = 40,995). Difference-in-differences multinomial logistic and linear probability models with state and year fixed-effects were used to estimate the effects.ResultsWe found strong evidence of increased Medicaid coverage in expansion states (3.2 to 5.0 percentage points), reasonably strong evidence of reduced private insurance coverage (?2.2 to ?2.5 percentage points), and some evidence of reduced uninsured rate (from no effect to ?3.7 percentage points). Results suggest that the increase in Medicaid coverage was due at least in part to the “crowd-out” of private insurance in expansion states. No statistically significant effects were detected for access and use outcomes.ConclusionsFindings suggest that state Medicaid expansions led to an increase in Medicaid coverage and a decrease in private insurance coverage as well as the uninsured. However, no evidence was found for health care access and use outcomes. Further research into access and use is needed when more data become available for the post-expansion period.     

Uninsured Veterans Who Will Need to Obtain Insurance Coverage Under the Patient Protection and Affordable Care Act

Objectives. We examined the number and clinical needs of uninsured veterans, including those who will be eligible for the Medicaid expansion and health insurance exchanges in 2014.Methods. We analyzed weighted data for 8710 veterans from the 2010 National Survey of Veterans, classifying it by veterans’ age, income, household size, and insurance status.Results. Of 22 million veterans, about 7%, or more than 1.5 million, were uninsured and will need to obtain coverage by enrolling in US Department of Veterans Affairs (VA) care or the Medicaid expansion or by participating in the health insurance exchanges. Of those uninsured, 55%, or more than 800 000, are likely eligible for the Medicaid expansion if states implement it. Compared with veterans with any health coverage, those who were uninsured were younger and more likely to be single, Black, and low income and to have been deployed to Iraq and Afghanistan.Conclusions. The Patient Protection and Affordable Care Act is likely to have a considerable impact on uninsured veterans, which may have implications for the VA, the Medicaid expansion, and the health insurance exchanges.The Patient Protection and Affordable Care Act (ACA)1 represents one of the most significant overhauls of the US health care system and is expected to affect millions of uninsured people across the country. Military veterans constitute a particularly important segment of the population because of their service to the country, access to US Department of Veterans Affairs (VA) health care, and other special benefits after their service. However, little has been written on the potential impact of the ACA on the health and health care of veterans.2 Although the VA operates an integrated national health care system that offers free or low-cost services to eligible veterans, many veterans are not enrolled in VA health care, and some are ineligible. Enrollment in VA health care satisfies the ACA’s requirement for insurance coverage, but eligibility for VA health care is determined on the basis of a complex system of priorities, mostly based on service-connected disability, income, and age, and it generally requires a military service discharge that is other than dishonorable (i.e., honorable, general).One study estimated that only 13% (3.6 million) of veterans report receiving some or all of their health care at the VA, and the vast majority (> 20 million) receive no health care from the VA.3 Most veterans thus rely on non-VA health care and are covered by various private or other public forms of health insurance, including Medicare and Medicaid. A small, albeit important, minority of veterans have no health insurance coverage. Estimates based on data from 1987 to 2004 showed that 7.7% of veterans were uninsured (including having no VA coverage), which equates to nearly 1.8 million veterans and represents 4.7% of all uninsured US residents.4Lack of health insurance coverage is an important problem because it can hinder access to effective health care, including needed medical visits, preventive care, and other services, and it can ultimately lead to poor health, premature mortality, and high medical costs.5,6 Being uninsured is a growing problem in the United States that the ACA addresses by requiring virtually all legal US residents to have health insurance. The ACA includes various provisions to help US residents, including veterans, accomplish this.One major provision that is optional for states to implement is the expansion of Medicaid coverage to all individuals aged 18 to 65 years with incomes at or below 138% of the federal poverty level. Although not all states will implement this expansion, and the number of participating states is currently unknown, many poor, uninsured adults will be able to obtain Medicaid coverage in states that implement the Medicaid expansion. Uninsured adults who have incomes above the Medicaid expansion limit or who live in states that do not implement the Medicaid expansion will have to purchase health insurance and may participate in the health insurance exchanges.A second major provision of the ACA is the creation of health insurance exchanges in each state whereby individuals may purchase competitive health insurance plans that are eligible for federal subsidies, but those subsidies are only available to those with income above the federal poverty level. Both of these major ACA provisions are planned for implementation in 2014 and will introduce a variety of coverage options for US residents, including veterans.There has been little study of uninsured veterans and no study of the potential impact of the ACA on veterans in general. Moreover, most data that exist on veterans are based on VA data, which only contain information about veterans who use VA health services and do not include information about those who are uninsured or not covered by VA health care. However, 1 population-based study7 has provided some evidence that a substantial number of veterans are uninsured (particularly those younger than 65 years) and that many uninsured veterans are in poor health, often forego needed health care because of costs, and have equal or worse access to health care than other uninsured adults in the general population. As the country moves toward a new era of health care with the ACA and continues to engage in conflicts in the Middle East, the impact of the ACA on the health care of veterans needs to be considered.We used a recent nationally representative survey of veterans to (1) describe the proportion and characteristics of veterans who are currently uninsured because they will likely be required to obtain coverage under the ACA; (2) determine, among those who are uninsured, who will likely be eligible for the Medicaid expansion; and (3) compare the sociodemographic and health characteristics of those who are uninsured and likely eligible for Medicaid expansion (LEME), those who are uninsured and not LEME, and those who currently have health insurance coverage. The results provide information about the number and health characteristics of veterans who will likely be affected by different provisions of the ACA and inform planning efforts for the VA and states that implement the Medicaid expansion and health insurance exchanges.