Question

Nyman’s theory for demand on health insurance supports the increasing medical care cost to eliminate inefficient moral hazard. Do you agree or disagree with it? Please explain and cite a reference link (URL) to an article which supports your answer.

Answer 1

There is a presumption that universal coverage can induce a rather substantial degree of moral hazard and therefore it can reduce national economic welfare correspondingly. In 2003, John Nyman published his;theory of Demand for Health Insurance; uncovering a number of what he argued were critical errors in the way in which the insurance payoff has been understood through the lens of welfare economics, and that the cumulative effect of these errors has been for introducing a decided bias in the formulation of health coverage policy, (Nyman, 2003).