Book Reviews

Christian Pardo of Saint Joseph’s University reviews “Sick to Debt: How Smarter Markets Lead to Better Care,” by Peter A. Ubel. The Econlit abstract of this book begins: “Explores the current state of the American health-care system, with a particular focus on health-care consumerism and strategies for improving the functioning of health-care markets.”

Ordeals, inequalities, moral hazard and non-monetary incentives in health care

This essay begins by summarizing the reasons why unregulated health-care markets are inefficient. The inefficiencies stem from the asymmetries of information among providers, patients and payers, which give rise to moral hazard and adverse selection. Attempts to ameliorate these inefficiencies by means of risk-adjusted insurance and monetary incentives such as co-pays and deductibles lessen the inefficiencies at the cost of increasing inequalities. Another possibility is to rely on non-monetary incentives, including ordeals. While not a magic bullet, these are feasible methods for addressing the inadequacies of market provision of health care, such as moral hazard.