Diabetes Treatments and Moral Hazard

Abstract:     
In the face of rising diabetes rates, many states passed laws requiring health insurance plans to cover medical treatments for the disease. Although supporters of the mandates expect them to improve the health of diabetics, they have the potential to generate a moral hazard to the extent that medical treatments might displace individual behavioral improvements. Another possibility is that the mandates do little to improve insurance coverage for most individuals, as previous research on benefit mandates has suggested that often mandates duplicate what plans already cover. To examine the effects of these mandates, we employ a triple differences methodology comparing the change in the gap in body mass index (BMI) between diabetics and non-diabetics in mandate and non-mandate states. We find that mandates do generate a moral hazard problem with diabetics exhibiting higher BMIs after the adoption of these mandates.

Keywords: Insurance, Mandates, Obesity, Offsetting Behavior

JEL Classifications: I12, I18, J32, J38

Accepted Paper Series