The effects of selection and moral hazard in additional health insurance in a universal healthcare system: evidence from Taiwan

In this study, we investigate the effect of both voluntary private health insurance and compulsory social health insurance on the utilization of medical care services under Taiwan’s universal mandatory National Health Insurance scheme. Using data for all inpatient services rendered by a large tertiary medical center in Taiwan, we found evidence of advantageous selection into private health insurance. After controlling for this selection effect, we found substantial moral hazard in both voluntary and mandatory additional health insurance. We also found heterogeneity in the moral hazard effect, which varied depending on the kind of medical care utilized and the kinds of insurance benefits available to patient. This hospital-based study suggests that it is unlikely that additional private health insurance would reduce government spending on healthcare for the patients at our medical center. It might in fact contribute to inequality in healthcare among our patients of different social economic backgrounds as well as have some fiscal spillover effect on the National Health Insurance program, if similar of studies of the other medical centers across Taiwan were to corroborate our findings.