Countering Moral Hazard in Public and Private Health Care Systems: A Review of Recent Evidence

Abstract

Within both publicly and privately financed health care Systems different funding mechanisms have evolved, or have been proposed, to deal with the problem of ‘moral hazard’. Moral hazard arises when financial incentives within the health care System lead to either inefficient demands for care by consumers or inefficient supply of care by providers. In this paper the problem of moral hazard is outlined in more detail, and different ways of countering moral hazard are reviewed in terms of three criteria: effect on patient utilisation of health services in general; effect on utilisation by different groups of patients; and effect on health status. It is concluded that evidence on different methods of funding health services can only be judged in the context of objectives. If the objectives of health care delivery are ‘maintenance or improvement of health’ and ‘equal access for equal need’ then charges and finance of care through health maintenance organisations both appear to be less favourable than ‘free’ care at the point of delivery whilst the latter is not necessarily more costly as a resuit. Research on other suggested alternatives is required, otherwise radical changes to health care financing in the UK will simply result in movement from one unproven system to another.