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A Semi-Parametric Model for Asymmetric Information in Health Plan Markets

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  • Ralph Bradley

Abstract

Two sources of asymmetric information in health markets are adverse selection where only individuals know their illness probability and their preventive effort to reduce illness probabilities. This effort is not observed by insurers, and thus individuals cannot be adequately compensated for their effort. I investigate whether asymmetric information plays a role in health care markets through a semi-parametric model that allows both adverse selection and preventive effort. I find that preventive effort plays a role in illness probabilities. If the United States implements universal health coverage, the currently uninsured population will exert less preventive effort, and their illness probabilities will increase. (JEL I11, C14) Copyright 2005, Oxford University Press.

Suggested Citation

  • Ralph Bradley, 2005. "A Semi-Parametric Model for Asymmetric Information in Health Plan Markets," Economic Inquiry, Western Economic Association International, vol. 43(4), pages 812-822, October.
    • Handle: RePEc:oup:ecinqu:v:43:y:2005:i:4:p:812-822
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    File URL: http://hdl.handle.net/10.1093/ei/cbi058
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    Cited by:

    1. Ralph Bradley & Colin Baker, 2013. "The Simultaneous Effects of Obesity, Insurance Choice, and Medical Visit Choice on Health Care Costs," NBER Chapters, in: Measuring and Modeling Health Care Costs, pages 211-240, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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