Asymmetric information in health insurance: evidence from the National Medical Expenditure Survey

Adverse selection is perceived to be a major source of market failure in in surance markets. There is little empirical evidence on the extent of the pr oblem. We estimate a structural model of health insurance and health care c hoices using data on single individuals from the NMES. A robust prediction of adverse-selection models is that riskier types buy more coverage and, on average, end up using more care. We test for unobservables linking health insurance status and health care consumption. We find no evidence of inform ational asymmetries.