Health Care Moral Hazard

“Moral hazard is a term describing how behavior changes when people are insured against losses.” Moral hazard can be entered into all characteristics of life throughout a business in internal and external affairs. Before researching about Moral Hazard we had no idea what it pertained to besides the definition. It is a widespread problem that has been growing over the past decade. We chose a Moral Hazard in health care because we feel that it is a rising dangerous conflict in the United States. In this essay we will be presenting an argument about Moral Hazard in the Health Care profession. Although there are many to discuss we will only examine one. The argument we would like to make is people are using too much medical insurance, and that’s why our costs are becoming too high.
What this means is we are accepting insurance that is worth more to us than we spend to obtain it. When we know if we can’t pay the amount of money back that someone else will be paying the bill, we will use more medical insurance because the amount of money to obtain it is far below the amount of the service itself. For example, if we go to the doctors the medical insurance will pay an amount to the doctor and we pay a co-payment way less than the actual amount. In the “moral hazard” case, we’re using care that costs more than it’s worth. It can be argued that the insurer is getting ripped off.
The reason this is a concern for financial market observers is, the process used by medical insurance companies is to assess the risk of potential policyholders and make a decision to provide or deny coverage. Insurers need to grant coverage in order to generate income from insurance premiums, but to be profitable they need to pay as few claims as possible. Moral hazard can arise in the insurance industry when insured parties behave differently as a result of having