An Economist's Account of the Existence of Moral hazard in the Essay

An Economist's Account of the Existence of Moral hazard in the healthcare sector, and describe the mechanisms necessary to tac - Essay Example However, it is argued that the existence of the excessive utilization of these systems is due to the absence of a financial barrier to control the demand, and presence of financial arrangements on the supply side, which enables providers to supply wasteful amounts. Generally, unregulated, competitive markets result in private health insurance, which contributes to the concept of more insurance, which helps reduce health risks, but at the same time, increases demand and cost. In this regard, Nyman (2003) argued that most economists view the idea of controlling the supply side as a possible way of alleviating this problem. With such deliberations, it has been difficult for both the policy makers and economists to measure the level of demand and supply considered ideal in the market. In light with this, initiatives have been formulated in order to counteract moral hazard. Consumer moral hazards counter policies In order for policies to respond to consumer moral hazards, various issues h ave to be put into consideration without necessarily focusing on financial ones. The use of primary-care doctors as the gateway to preventing overuse of hospital services has been endorsed by many high income countries (Culyer and Newhouse 2000). On the other hand, the same modality has been endorsed by lower income countries by way of using bare-foot doctors. Nevertheless, numerous measures have been designed to counteract consumer moral hazards. Co-payments Co-payments have been utilized by a number of countries to exert some financial burden on the consumer in order to discourage unnecessary use of health care. This involves several schemes, which differ on the basis of the financial arrangement (Sexton 2010). Nevertheless, individual scheme is composed of flat rate change for each unit of service, a deductable akin to excess, and co-insurance. One of the most notable contributions of co-payments comes from the famous health insurance implement (HIE). In this particular experimen t, families that participated in the experiment were randomly assigned one of the different free-for-service insurance plans. The free for service plans involved different levels of cost sharing. Covered expenses included most medical services. Another set of the plan involved free access to inpatient services. The outcome of the experiment indicated that utilization responds to amounts paid out of pocket. Per capita total expenses on the free recorded 45 percent higher than those on the plan with a 95 percent co-insurance, however, spending rates on the rest of plans was on average. On the other hand, outpatient expenses on the provided free plan recorded an increase of 67 percent higher than those on the 95 percent co-insurance plan. The findings from this experiment indicated that an increase in the user price will lead to a decrease in demand. In this regard, it is apparent that implementing charges would lead to doctors concentrating more on those who can afford to pay (Sexton 2010). However, the implication is that those more in need tends to have less access to services. This becomes the problem of the approach advocated by RAND study. This is arguably true because in aggravate, the figure of those more in need of service and able to pay is replaced by those less in need and unable to pay. The other important issue of concern is whether the response of demand for health care to adjustment in its prices is the same or different for several groups in society (Nyman 2003). It is also necessary to