Suppose you have an insurance contract stipulating that you (the insured) have a $500 deductible. After...

Transcribed Image Text:

Suppose you have an insurance contract stipulating that you (the insured) have a $500 deductible. After that, insurance will cover 90% of the medical expenses incurred; you (the insured) will pay 10%. Your annual out-of-pocket maximum, as stated by the contract, is $10,000. Let's say you have not incurred any medical expenses this year (insurance cycle). Suppose further that you decide to get tested for allergies, and the total bill after your appointment is $1000. You (the insured) will pay ...... Given the information below, is there evidence of moral hazard? 2000 2001 Insured? Avg. Expenditures Insured? Avg. Expenditures Economics Professors Yes $20,000 222 $20,000 Math Professors Yes $10,000 222 $7,000 Suppose you have an insurance contract stipulating that you (the insured) have a $500 deductible. After that, insurance will cover 90% of the medical expenses incurred; you (the insured) will pay 10%. Your annual out-of-pocket maximum, as stated by the contract, is $10,000. Let's say you have not incurred any medical expenses this year (insurance cycle). Suppose further that you decide to get tested for allergies, and the total bill after your appointment is $1000. You (the insured) will pay ...... Given the information below, is there evidence of moral hazard? 2000 2001 Insured? Avg. Expenditures Insured? Avg. Expenditures Economics Professors Yes $20,000 222 $20,000 Math Professors Yes $10,000 222 $7,000