Health insurance: Medical treatment vs disability payment

Geir Asheim, Anne Wenche Emblem and Tore Nilssen ()

Research in Economics, 2010, vol. 64, issue 3, 137-145

Abstract: We present arguments for treating health insurance and disability insurance in an integrated manner in economic analysis, based on a model where each individual's utility depends on both consumption and health and her income depends on her earning ability. When purchasing insurance, she may choose a contract that offers less than full medical treatment. We find that high-ability individuals demand full recovery and equalize utility across states, while low-ability individuals demand partial treatment and cash compensation and suffer a loss in utility if ill. Our results carry over to the case where health states are not observable.

Keywords: Health; insurance; Health; demand; Disability; insurance (search for similar items in EconPapers)
Date: 2010
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