How does "moral risk" differ from "moral hazard"?

Moral risk indeed refers to the ethical implications governing the choices and decisions made by individuals, particularly in contexts such as healthcare. It emphasizes the moral and ethical considerations that influence patient behavior and decision-making, acknowledging how those choices can lead to varying outcomes. In contrast, moral hazard specifically pertains to the idea that individuals may engage in riskier behavior when they are insulated from the consequences of that behavior, often due to insurance coverage. This leads to a focus on financial implications rather than ethical considerations.

Thus, the distinction is crucial; moral risk digs into the ethical facets surrounding choices, while moral hazard centers on the financial repercussions of those choices in insurance settings, where the insured individual may act differently than they would if they were fully responsible for all costs. Understanding this difference helps clarify discussions about patient behavior and the financial structures of healthcare systems.