Question

Does universal health care solve either the moral hazard or the adverse selection problem or both?

Answer 1

In case of a Universal health care system where the government act as a health insurer and introduces compulsory payment in the form of medical care tax, moral hazard can be a serious problem. In case of private insurance citizens will take more care of their health because they are bearing the cost of their actions privately. When there is universal Health Insurance in place people will have incentive to take less care of their health because now a cost is not borne by them but by the government. Therefore moral hazard seems to be a major problem in Universal Healthcare system