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Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey

James H. Cardon and Igal Hendel
The RAND Journal of Economics
Vol. 32, No. 3 (Autumn, 2001), pp. 408-427
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/2696362
Page Count: 20
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Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey
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Abstract

Adverse selection is perceived to be a major source of market failure in insurance markets. There is little empirical evidence on the extent of the problem. We estimate a structural model of health insurance and health care choices using data on single individuals from the NMES. A robust prediction of adverse-selection models is that riskier types buy more coverage and, on average, end up using more care. We test for unobservables linking health insurance status and health care consumption. We find no evidence of informational asymmetries.

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