The Moral Hazard Concept in Health Insurance
The concept of moral hazard drives up the cost of healthcare. Insured consumers are less sensitive to the cost of healthcare goods and services than uninsured consumers (179). Therefore, insured consumers use more “unnecessary” healthcare goods and products since they are not required to pay. The cost of healthcare, in turn, goes up as the range of sought healthcare products and services increases.
People should not have to put more “skin” (money) in the game. As evident from the moral hazard, insured consumers are less sensitive to the cost of healthcare, a habit that drives up the cost of healthcare. Therefore, putting in more money in insurance will increase healthcare cost. Instead of putting in more money in health insurance policies, the policies should be co-insured. When insured consumers are required to pay part of their medical bills, they will not seek “unnecessary” healthcare services.
If people put more “skin” in the game, the cost of medical services goes up. When the insurance policy is not co-insured, the consumers are insensitive to the cost of healthcare. Therefore, they seek unnecessary healthcare services that end up increasing the cost of healthcare.