Does medical treatment cause moral hazard?:


Yes, definite moral hazard territory. Two studies show that we will happily throw healthy behavior out the window if we think medicine has us covered:

In the face of rising rates of diabetes, many states have passed laws requiring health insurance plans to cover medical treatments for the disease. Although supporters of the mandates expect them to improve the health of diabetics, the mandates have the potential to generate a moral hazard to the extent that medical treatments might displace individual behavioral improvements. Another possibility is that the mandates do little to improve insurance coverage for most individuals, as previous research on benefit mandates has suggested that mandates often duplicate what plans already cover. To examine the effects of these mandates, we employ a triple‐differences methodology comparing the change in the gap in body mass index (BMI) between diabetics and nondiabetics in mandate and nonmandate states. We find that mandates do generate a moral hazard problem, with diabetics exhibiting higher BMIs after the adoption of these mandates.

Source: “Diabetes Treatments and Moral Hazard” from The Journal of Law and Economics

And:

This research investigates consumer reactions to the marketing of drugs and supplements and the consequences for a healthy lifestyle. A series of experiments provides evidence that drug marketing undermines intentions to engage in health‐protective behaviors (i.e., a boomerang effect). The boomerang arises from two psychological mechanisms: (1) drugs reduce risk perceptions and perceived importance of, and motivation to engage in, complementary health‐protective behaviors, and (2) drugs are associated with poor health that reduces self‐efficacy and perceived ability to engage in complementary health‐protective behaviors. A combined intervention accompanying a drug remedy that targets both motivation and ability mitigates the drug boomerang on a healthy lifestyle.

Source: “How Does Drug and Supplement Marketing Affect a Healthy Lifestyle?” from Journal of Consumer Research

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