Incentivizing efficient utilization without reducing access: The case against cost‐sharing in insurance

Markus Rieger-Fels

Health Economics, 2020, vol. 29, issue 7, 827-840

Abstract: Cost‐sharing is regarded as an important tool to reduce moral hazard in health insurance. Contrary to standard prediction, however, such requirements are found to decrease utilization both of efficient and of inefficient care. I employ a simple model that incorporates two possible explanations—consumer mistakes and limited access—to assess the welfare implications of different insurance designs. I find cost‐sharing never to be an optimal solution as it produces two novel inefficiencies by limiting access. An alternative design, relying on bonuses, has no such side effects and achieves the same incentivization. I show how the optimal design can be deduced empirically and discuss possible impediments to its implementation.

Date: 2020
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Citations: View citations in EconPapers (3)

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https://doi.org/10.1002/hec.4023

Related works:
Working Paper: Incentivizing Efficient Utilization Without Reducing Access: The Case Against Cost-Sharing in Insurance (2018)
Working Paper: Incentivizing efficient utilization without reducing access: The case against cost-sharing in insurance (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:29:y:2020:i:7:p:827-840

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