What does moral hazard refer to in healthcare?

Moral hazard in healthcare refers to the phenomenon where individuals may take on higher risks or engage in behavior that they would typically avoid because they do not have to bear the full costs of their actions. When it comes to healthcare, this often manifests as the overuse of healthcare services when individuals are insulated from the costs, such as when insurance covers most of the expenses.

For example, a patient with comprehensive health insurance might be less judicious about visiting a doctor for minor ailments or opting for expensive procedures because they do not perceive the full financial consequences of these decisions. This can lead to an increase in total healthcare spending as patients seek more care than they would otherwise deem necessary if they were paying the full price out-of-pocket.

In terms of the other options, while patients avoiding necessary services could be an issue for certain healthcare access challenges, it does not exemplify moral hazard. Similarly, lack of preventive care might stem from different factors such as education or accessibility rather than insuring the costs. Healthcare fraud and abuse, although significant issues in the industry, address different aspects of ethical and legal violations rather than the behavior driven by the financial protection that insurance provides.