Moral Hazards in Healthcare
MORAL HAZARDS IN HEALTHCARE
Professor Judy Justice
Macro Economics 202
Moral is defined by Dictonary.com as pertaining to, or concerned with the principles or rules of right conduct or the distinction between right and wrong. People have different understandings of what is right and what is wrong. Morals are something that comes into play in our daily lives. How does this relate to healthcare and how can there be moral hazards? It is an issue that is present and wide spread in our country today. According to Hubbard and O’Brien, a moral hazard refers to actions people take after they have entered into a transaction that make the other party to the transaction worse off. (2012) Another way of describing this is that one party changes their actions after attaining some benefit. This causes problems for many entities. Focusing on the principal agent problem and moral hazards in healthcare will be the intent of this paper. Moral hazard refers to cases where people who are in possession of important and relevant information, and where the precision of the knowledge they possess cannot be disputed, have an motivation to behave differently - either in a dishonest way or in a way that might not provide the full benefit to the principal. (biz/ed.com, nd.) In terms of healthcare, this can be related to the relationship between physicians and patients. Doctors become the agent. The doctors pursue their own interests rather than the interests of the principal, which is the patient. The patient gives the doctor the permission to act on their behalf. (AmosWEB, nd.) In turn the doctor should make decisions that would help the patient attain the best outcome with the medical advice and service they provide. But the problem happens occurs when the doctors looks out for him/herself instead of looking out for the patient. Doctors take advantage of the knowledge they have in medicine and...
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