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Healthcare takes centre stage, finally! 169

USA The 2010 Affordable The National Quality Regulatory activity in the USA
Care Act required the Strategy is a developing is for the most part decentralized
Department of Health strategy guided by DHHS as with multiple local governmental
and Human Services an attempt to set national aims and private sector agencies
(DHHS) to develop a and priorities in healthcare involved in assuring quality.
National Strategy for quality improvement. Each state licenses healthcare
the Improvement of The strategy has three facilities within its territory.
Heath Care (National aims: better care, healthy US General Accountability
Quality strategy). The people and communities, Office (GAO) often reviews the
Nursing Home Reform and affordable care. The actions and activities of CMS
act (OBRA’87) deals OBRA’87 deals with and other healthcare agencies
with nursing home nursing home regulation; it in government. The GAO has
regulation. defines regulatory standards published criticism of the limited
for nursing homes at the use of regulatory powers with
federal level, supplemented regard to nursing homes. The
by individual state laws. National Quality Strategy is an
attempt to unify and streamline
the efforts of diverse federal
agencies involved in healthcare,
with input from private sector
stakeholders.

INFOrMatION asyMMetry IN INdIa’s PrIvate INsUraNCe
MaRKeTS

Box 1: empirical strategy to identify information
asymmetry in insurance markets

the empirical literature on testing for information asymmetry in insurance markets can be
traced back to the seminal articles of Chiappori and Salanie´ (2000, 2003). Rooted in Chiappori
and Salanie´ (2000, 2003), these studies propose a variety of reduced-form correlational tests to
statistically demonstrate the existence of asymmetric information. The basic idea is to compare
claims rates consumers, who have identical observed characteristics, but have self-selected into
different insurance policies (Puelz and Snow 1994, Cawley and Philipson 1999, Cardon and Hendel
2001, Finkelstein and Poterba 2004, 2006, Cohen 2005, and Finkelstein and McGarry 2006). A
positive correlation between insurance coverage and claims – after controlling for all observable
characteristics so that the two individuals being compared as identical on observable characteristics
– provides evidence of asymmetric information. This could result either because of adverse selection
(with greater-risk taking individuals self-selecting into the more expensive, high feature contract) or
moral hazard (because individuals behave differently under the two contracts).

5.32 To examine asymmetric information in the Indian insurance market, the empirical
analysis is conducted using insurer-specific yearly time-series data secured from IRDA. The
unit of analysis is an insurer of a specific insurer type (i.e., private, public sector or standalone)
underwriting a specific insurance-type (government-sponsored, group insurance or individual/