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Adverse selection in the U.S. health insurance markets: Evidence from the MEPS

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  • Di Novi, Cinzia

Abstract

We use the 2003/2004 Medical Expenditure Panel Survey in conjunctions with the 2002 National Health Interview Survey to test for adverse selection in the U.S. private health insurance market. The key idea is to test whether the individuals who are more exposed to health risks also buy insurance contracts with more coverage or higher expected payments. The critical statistical problem is that the extension of insurance is only measured for those who are insured and face positive health care expenditure. So there is a possible sample selection bias effect. The procedure used is based on a method suggested by Wooldridge (1995). The method also accounts for heterogeneity across individuals. The simultaneous account taken of both possible sources of bias is new for this kind of application.

Suggested Citation

  • Di Novi, Cinzia, 2008. "Adverse selection in the U.S. health insurance markets: Evidence from the MEPS," POLIS Working Papers 103, Institute of Public Policy and Public Choice - POLIS.
    • Handle: RePEc:uca:ucapdv:103
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    References listed on IDEAS

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    1. Keeler, Emmett B & Newhouse, Joseph P & Phelps, C E, 1977. "Deductibles and the Demand for Medical Care Services: The Theory of a Consumer Facing a Variable Price Schedule under Uncertainty," Econometrica, Econometric Society, vol. 45(3), pages 641-655, April.
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    Cited by:

    1. Marchese, Carla, 2008. "The limits to growth then and now," POLIS Working Papers 105, Institute of Public Policy and Public Choice - POLIS.
    2. Piero Cavaleri & Michael Keren & Giovanni B. Ramello & Vittorio Valli, 2009. "Publishing an E-Journal on a Shoe String: Is It a Sustainable Project?," Economic Analysis and Policy, Elsevier, vol. 39(1), pages 89-101, March.

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    More about this item

    Keywords

    adverse selection; health insurance; risk profile;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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