SJSU Social Insurance Three Legged Stool Approach & Moral Hazard Discussion

1. (a) Discuss the three-legged-stool approach of Massachusetts’ experiment with incremental universalism. (b) What were some of the consequences or impacts of this three-legged-stool implementation in the state? (3+3 = 6 points)

2. (a) What is moral hazard? (b) Moral hazard is considered to be multi-dimensional. In this context, discuss any four types of moral hazard that might show up in an economy. (2 + 4 = 6 points)

3. We know that the effectiveness of social insurance programs for individuals facing adverse events like unemployment, depends on the level of self-insurance available to them. Now, think of the stimulus check that was given by the federal government to people this year due to the pandemic. Were there any income restrictions on the check? If yes, why? (Try to motivate your answer from the point of view of the government, and thinking of self-insurance versus social insurance. Write in your own words.) (5 points)

4. Is moral hazard likely to be a bigger issue or problem in the health insurance market or the life insurance market for insurers? Explain why in your own words. (1 + 3 = 4 points)

5. (a) In the field of political economy, what do we mean by government failure? (b) Name and discuss any two forms of government failure that could be seen in an economy. (2 + 2 = 4 points)