Health Care Blog February 8, 2024
Jeff Goldsmith

How the Search for Perfect Markets has Damaged Health Policy

Sometimes ideas in healthcare are so powerful that they haunt us for generations even though their link to the real world we all live in is tenuous. The idea of “moral hazard” is one of these ideas. In 1963, future Nobel Laureate economist Kenneth Arrow wrote an influential essay about the applicability of market principles to medicine entitled “Uncertainty and the Welfare Economics of Medical Care”.

One problem Arrow mentioned in this essay was “moral hazard”- the enhancement of demand for something people use to buy for themselves that is financed and purchased through third party insurance. Arrow described two varieties of moral hazard: the patient version, where insurance...

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Topics: Employer, Govt Agencies, Healthcare System, Insurance, Patient / Consumer, Pricing / Spending, Provider
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