What does moral hazard mean in the context of health insurance?

Moral hazard in the context of health insurance refers to situations where individuals may take greater risks or engage in behaviors that lead to higher costs because they do not bear the full financial consequences of those actions. When individuals have health insurance, they might be more inclined to seek more medical care, overuse services, or neglect preventive measures, as they do not directly face the financial costs associated with those decisions. This concept highlights that with the safety net provided by insurance, people may not act as cautiously or responsibly concerning their health care choices, which can lead to increased overall costs for the insurer and, ultimately, for the entire health care system.

In contrast, the other options describe different aspects related to health care but do not accurately define the moral hazard phenomenon. For example, avoiding necessary care due to costs pertains more to underutilization, while issues related to pre-existing conditions focus on coverage policies rather than behavior changes impacted by insurance. The burden of proof in claims deals with the procedural aspect of insurance rather than individual behavior in health care utilization. Understanding moral hazard is crucial for policymakers and insurers to design better health insurance models that minimize unnecessary costs while maintaining access to care.