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Testing Adverse Selection Effect Related to Medical Insurance

【Authors】
ZHONG Xiaomin, YANG Liumei & LU Jiankun
【WorkUnit】
ZHONG Xiaomin (Zhejiang University of Finance & Economics, 310018)
YANG Liumei (Wuhan University, 430072)
LU Jiankun (Zhejiang University of Finance & Economics, 310018)
【Abstract】

This paper empirically analyzes the adverse selection effect about urban and rural medical insurance based on real outpatient visit data from a top-level hospital in Hangzhou. Rather than taking the questionnaire survey data regarding the residents' health status self-evaluation, this paper constructs a theoretical model to derive the health status of related residents and then estimates the health status of the residents who cannot be directly observed. Based on the regression models such as OLS and Logit, the relationship between insurance participation and health status was analyzed, and the effect of adverse selection of medical insurance for urban and rural residents was examined. The study found that there is an adverse selection effect about the decision of whether to participate in the insurance policy or not. The health status of the residents significantly affects the willingness of insurance participation. The health status of the uninsured residents is better than the insured. However, in the decision-making stage, the adverse selection effect is not significant. This paper sheds light on policy-making that when building a unified urban and rural medical insurance system, it may be possible to enforce compulsory insurance requirements to resolve the adverse selection problem, and appropriately increase the optional grades of insurance to meet the diverse needs of residents.

JEL:I13, I18, H55

【KeyWords】
Utility Function, Clinical Data, Health Status Distribution, Adverse Selection