The incentive for prevention in public health Systems

Renaud Bourlès ()

No 1001, IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France

Abstract: This paper examines the effect of moral hazard on public health insurance contract. It models primary prevention in a two period model with classification risk. Agent’s preferences appear to play an important role in the optimal determination of preventive effort and insurance between generations. If absolute prudence is larger than twice absolute risk aversion, moral hazard increases intergenerational insurance and classification risk. This highlights a tradeoff between prevention and insurance arising from classification risk. An increase in the difference between prudence and twice risk aversion (that we define as the degree of “protectiveness”) moreover makes public insurance contracts more stable (when competing with spot insurance) if the cost of prevention is low enough when agents preferences exhibit CRRA. Under a formulated utility function with linear reciprocal derivative, we finally show that an increase in agent’s degree of “protectiveness” enhances the stability of public insurance and the extent of intergenerational insurance.

Keywords: Public health insurance; Classification risk; Moral Hazard; Prudence. (search for similar items in EconPapers)
JEL-codes: D81 D91 G22 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-02-17, Revised 2010-02-17
New Economics Papers: this item is included in nep-cta, nep-hea, nep-ias and nep-upt
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Related works:
Journal Article: Prevention incentives in long‐term insurance contracts (2017)
Working Paper: Prevention incentives in long-term insurance contracts (2017)
Working Paper: Prevention Incentives in Long-Term Insurance Contracts (2015)
Working Paper: Prevention Incentives in Long-Term Insurance Contracts (2015)
Working Paper: MORAL HAZARD IN DYNAMIC INSURANCE CLASSIFICATION RISK AND PREPAYMENT (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:iep:wpidep:1001

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