Is 'moral hazard" inefficient? The policy implications of a new theory

Moral hazard refers to the additional health care that is purchased when persons become insured. Under conventional theory, health economists regard these additional I healthcare purchases as inefficient because they represent care that is worthless to consumers than it costs to produce. A new theory, however, suggests that much of moral hazard is actually efficient. When the care that was deemed to be welfare-decreasing is reclassified as welfare-increasing, health insurance becomes much more valuable to consumers than health economists have hitherto thought it was. As a result, there is a new argument for national health insurance: efficiency.