Physicians typically carry virtually complete malpractice insurance coverage. This contradicts standard theoretical predictions that (1) under a negligence rule of liability there should be no demand for insurance, an...
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Physicians typically carry virtually complete malpractice insurance coverage. This contradicts standard theoretical predictions that (1) under a negligence rule of liability there should be no demand for insurance, and (2) insurance policies under moral hazard will contain co-payment provisions. It is argued that judicial ‘errors’ in defining negligence generate a demand for liability and legal defense insurance. Physician co-payment undermines the insurer's incentives for legal defense and thus induces a trade-off between loss reduction by injury prevention and by legal defense. Fee-for-service reimbursement further distorts the physician's choice between injury prevention and insurance. Implications for the deterrent function of the tort system are discussed.
With rare exceptions the provision of actuarially fair health insurance tends to substantially increase the demand for medical care by redistributing income from the healthy to the sick. This suggests that previous st...
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With rare exceptions the provision of actuarially fair health insurance tends to substantially increase the demand for medical care by redistributing income from the healthy to the sick. This suggests that previous studies which attribute all the extra demand for medical care to moral hazard effects may overestimate the efficiency costs of health insurance.
This study examines alternative classification approaches for setting medical malpractice insurance premiums. Insurers generally form risk classification categories on factors other than the physician's own loss e...
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This study examines alternative classification approaches for setting medical malpractice insurance premiums. Insurers generally form risk classification categories on factors other than the physician's own loss experience. Our analysis of such classification approaches indicates different but no more categories than now used. An actuarially-fair premium-setting scheme based on the frequency and severity of the individual physician's losses would substantially penalize adverse experience. Alternatively, premiums could be set for groups of physicians, such as hospital medical staffs. Our simulations suggest that even staffs at rather small hospitals may be large enough to be experience-rated.
This study uses simulation methods to quantify the effects of adverse selection- The data used to develop the model provide information about whether families can accurately forecast their risk and whether this foreca...
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This study uses simulation methods to quantify the effects of adverse selection- The data used to develop the model provide information about whether families can accurately forecast their risk and whether this forecast affects the purchase of insurance coverage - key conditions for adverse selection to matter. The results suggest that adverse selection is sufficient to eliminate high-option benefit plans in multiple choice markets if insurers charge a single, experience-rated premium. Adverse selection is substantially reduced if premiums are varied according to demographic factors. Adverse selection is also restricted in supplementary insurance markets. In this market, supplementary policies are underpriced because a part of the additional benefits that purchasers can expect is a cost to the base plan and is not reflected in the supplementary premium. As a result, full supplementary coverage is attractive to both low and high risks.
International agencies such as the World Bank have widely advocated the use of health insurance as a way of improving health sector efficiency and equity in developing countries. However, in developing countries with ...
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International agencies such as the World Bank have widely advocated the use of health insurance as a way of improving health sector efficiency and equity in developing countries. However, in developing countries with well-established, multiple-player health insurance markets, such as South Africa, extension of insurance coverage is now inhibited by problems of moral hazard, and associated cost escalation and fragmentation of insurer risk-pools. Virtually no research has been done on the problem of risk selection in health insurance outside developed countries. This paper provides a brief overview of the problem of risk fragmentation as it has been studied in developed countries, and attempts to apply this to middle-income country settings, particularly that of South Africa. A number of possible remedial measures are discussed, with risk-equalization funds being given the most attention. An overview is given of the risk-equalization approach, common misconceptions regarding its working and the processes that might be required to assess its suitability in different national settings. Where there is widespread public support for social risk pooling in health care, and government is willing and able to assume a regulatory role to achieve this, risk-equalization approaches may achieve significant efficiency and equity gains without destroying the positive features of private health care financing, such as revenue generation, competition and free choice of insurer.
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