TY  - JOUR
AU  - Abraham,Jean Marie
AU  - DeLeire,Thomas
AU  - Royalty,Anne Beeson
TI  - Moral Hazard Matters: Measuring Relative Rates of Underinsurance Using Threshold Measures
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15410
PY  - 2009
Y2  - October 2009
UR  - http://www.nber.org/papers/w15410
L1  - http://www.nber.org/papers/w15410.pdf
N1  - Author contact info:
Jean Abraham
Department of Health Policy and Management
University of Minnesota
20 Delaware St SE
MMC 729
Minneapolis, MN 55455
E-Mail: abrah042@umn.edu

Thomas DeLeire
La Follette School of Public Affairs
University of Wisconsin-Madison
1225 Observatory Drive
Madison, WI 53706
Tel: 608-263-6998
Fax: 608/263-2820
E-Mail: deleire@wisc.edu

Anne Beeson Royalty
Department of Economics
Indiana University - Purdue University
at Indianapolis
425 University Blvd.
Indianapolis, IN 46202-5140
E-Mail: royalty@iupui.edu
AB  - This paper illustrates the impact of moral hazard for estimating relative rates of underinsurance and to present an adjustment method to correct for this source of bias. Individuals or households are often classified as underinsured if out-of-pocket spending on medical care relative to income exceeds some threshold.  We show that, without adjustment, this common threshold measure of underinsurance will underestimate the number with low levels of insurance coverage due to moral hazard.  We propose an adjustment method and apply it to the specific case of estimating the difference in rates of underinsurance among small- versus large-firm workers with full-year, employer-sponsored insurance. Using data from the 2005 Medical Expenditure Panel Survey, we find that after applying the adjustment, the underinsurance rate of small-firm households increases by approximately 20% with the adjustment for moral hazard and the difference in underinsurance rates between large firm and small firm households widens substantially. Adjusting for moral hazard makes a sizeable difference in the estimated prevalence of underinsurance using a threshold measure.
ER  -