Choosing optimal health insurance coverage involves a trade-off between the gain from risk reduction and the deadweight loss from moral hazard. This paper examines this trade-off empirically by estimating both the demand for health insurance and the demand for health services. It relies on data from a randomized controlled trial of cost-sharing's effects on the use of health services and on the health status for a general, non-elderly population.
Originally published in: Journal of Health Economics, v. 15, 1996, pp. 609-639.
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