• write up the answer to the entire question you have worked on based on the group workand workshop...

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• write up the answer to the entire question you have worked on based on the group workand workshop presentations. The report should be short (approximately 1000 words - notincluding: references, tables & figures) and will be submitted through Turnitin in iLearn.The report should have the following headings:o Introductiono Health economic theoryo Policy solutions
Question 33. Information asymmetry is a common issue in the market for health insurance.a. Introduction: Describe what is information asymmetry, and illustrate with examplesin the market for health insurance.b. Health economic theory: In theory, how does information asymmetry impact themarket for health insurance? How do consumers, insurers and providers behave?What is the impact on premiums and coverage?c. Policy solution: Explain how new technologies could be used by consumers, insurersand providers to reduce information asymmetry in the future.Suggested reading:Folland S, Goodman A and Stano M. The Economics of Health and Health Care.International edition, 7th edition. Upper Saddle River, N.J. : Pearson Prentice Hall; 2013.Chapter 8: Demand and Supply of Health Insurance and Chapter 10: AsymmetricInformation and Agency

Pragnya · Accepted Answer

Introduction
In any economic field, information is supposed to be distributed equally among the seller and buyers. Improper or inappropriate information distribution leads to unsatisfactory outcome. Information asymmetry is the situation where the buyer and seller share unequal or disproportionate parts of information. In health economics also, information asymmetry is observed in many fields. The patients or the consumers get mostly affected, having improper information about a medical treatment, fees, cost and other medical expenses. In such cases, where the buyers and sellers face trouble due to lack of information, they have to go to a third party to solve their case. Most of the patients face such issues in case of health insurance by the health insurance companies.
For example, the case may arise because of adverse selection. Patients with high risk of medical assistance many a times get low coverage or become low insured whereas people with low risk of medical emergencies are attracted by the insurance providers. This is a case of adverse selection and leads to asymmetry of information. Also, adverse selection can result when only unwell people buy insurance and made to pay higher premium but healthy people don’t see the emergence of it and don’t get a health insurance (1)
It has been studied that moral hazard can also be found in case of patient-physician relationship. From a patient’s perspective, a physician has a deep insight into the medical procedure, thus they may assume that physicians are well aware of the cost, expenses and other financial information regarding a specific medical procedure. The physicians are more judged upon their efficiency but not their efforts. Therefore, it may create an information asymmetry for the patients and physician relationship in a healthcare system (2).  
Health economic theory, impact of information asymmetry in health insurance 
Health economists apply the theory of economics to derive efficient outcomes and the objectives to efficiently and effectively use the resources. According to the theory of Akerlof, or the Lemon principal, a health agency for insurance may have many policies with varieties of structures with premium and coverage. A buyer,

• write up the answer to the entire question you have worked on based on the group workand workshop presentations. The report should be short (approximately 1000 words - notincluding: references,...

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