According to an article published in the Journal of the American Medical Association, it was found that up to 50% of annual deaths in the United States can be attributed to lifestyles and behaviors such as: use of tobacco and/or alcohol, poor diet, and inadequate physical activity (McGinnis and Foege 1993). Health insurance has long been regarded as a key component to the production of good health; however, in light of these high rates of mortality attributed to bad health behaviors, is insurance truly beneficial to our health? While insurance lowers the cost of health care, it can also lead to changes in the insured person’s behavior – otherwise known as moral hazard.
There are two types of behavioral changes known as “ex post moral hazard” and “ex ante moral hazard,” respectively (Ehrlich and Becker 1972). This paper looks to examine “ex ante moral hazard” which is the relationship between certain health related behaviors, both good and bad, and whether or not an individual is insured. While ex ante moral hazard is considered to be a possible result of having health insurance, as seen in the following quote, it is often noted to not be a considerable problem. “The extent of moral hazard in terms of actions that affect health may not be large for health insurance in most instances, since the uncompensated loss of health itself is so consequential (Cutler and Zeckhauser 2000).”
If moral hazard does in fact exist, then we would expect insured persons to exhibit “bad” health behaviors due to the fact that the costs associated with the consequences of these behaviors are lowered through insurance. Conversely, we would expect uninsured persons to exhibit healthier lifestyle behaviors so that they do not incur the high costs of medical care and losses that may accompany poor health.