HealthCare Economics
Information asymmetry is a scenario in which a portion of the healthcare participants has correct information while the other falls short of information. For example, a doctor could be aware of patients health status while the patient may fall short of this information. In this case, transactions may be incomplete. There are different models of information asymmetry. For example, there could occur adverse selection in which the ignorant party lacks information on health hazards associated.
Patients at times end up making uninformed decisions like the failure to take preventive care on their health status without the knowledge of its effect in the long run.
In such a case, since the agents could be aware of the patients state of health and the precautions expected, the patient may get no insurance repayments for the negligent act he committed. However in some instances, the moral hazard on the side of the patient may indicate higher cost of medical care.
The insurer is responsible for ensuring that the cost coinsurance is kept as low as possible. Unfortunately, in most case they only act on the basis of value based cost sharing with ignorant patients instead of advising the patients on the true costs and benefits of different forms of health care offered by different medical practitioners. Information dissemination is easier for the insurer and cheaper than sharing cost with the patients.
Scales are also set to show the levels of treatment required for certain patients (Philip, 2004). In case the provider may not provide the required care, then they will be faced with higher cost implications towards the coverage of the same.