Optimal health insurance for multiple goods and time periods

Randall Ellis, Shenyi Jiang and Willard Manning

Journal of Health Economics, 2015, vol. 41, issue C, 89-106

Abstract: We examine the efficiency-based arguments for second-best optimal health insurance with multiple treatment goods and multiple time periods. Correlated shocks across health care goods and over time interact with complementarity and substitutability to affect optimal cost sharing. Health care goods that are substitutes or have positively correlated demand shocks should have lower optimal patient cost sharing. Positive serial correlations of demand shocks and uncompensated losses that are positively correlated with covered health services also reduce optimal cost sharing. Our results rationalize covering pharmaceuticals and outpatient spending more fully than is implied by static, one good, or one period models.

Keywords: Health insurance; Optimal cost sharing; Risk aversion; Dynamic models; Complements and substitutes (search for similar items in EconPapers)
JEL-codes: D82 I11 I13 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:41:y:2015:i:c:p:89-106

DOI: 10.1016/j.jhealeco.2015.01.007

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