If there are moral hazards associated with health insurance

If there are moral hazards associated with health insurance, then why not eliminate health insurance entirely and have individuals pay the full cost of their health care?

Solution

Moral hazard refer to the responsiveness of healthcare spending to insurance coverage.Health insurance as reducing individuals(unobserved) effort in maintaining their health; because health insurance covers (some of) the financial costs that would be caused by poor health behaviors, individuals may have less incentive to avoid them they may exercise less, eat more cheeseburgers, and smoke more when they have insurance coverage.Health insurance, by design, lowers the price individuals pay for their medical care. economics teaches us that demand curves tend to slope down, that when we make something cheaper, people tend to buy more of it.