Question

Your employer decides the plan you have is too expensive and terminates it. Your new plan no longer covers all your health expenses. Instead, you have to pay 10% of the cost of your healthcare. Does this help with the moral hazard in part c and why or why not? You are advising your state’s governor on whether to expand Medicaid as part of healthcare reform. Using at least 2 supporting pieces of evidence, tell her what to do

Answer 1

Moral Hazard refers to the irrational behaviour taken by an individual or party once a transaction takes place, where in the cost of harm would be borne by another party

In case the employee has to pay 10% of its total healthcare cost, then his problem of moral hazard would reduce and he would start acting rationally and consciously.

This is because the individual is aware that any cost of health will now be borne by him and not the company and thus he must act responsibly.

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Medicaid helps in supporting medical expenditure of a section of society with low incomes and resources.

It is advisable for the governor to expand Medicaid as part of healthcare reforms, as it benefits the lower section and helps them lead healthy lifestyle so that they can work and make money and contribute to GDP, and also benefit the governor in getting more votes in next elections.