A method to simulate incentives for cost containment under various cost sharing designs: an application to a first-euro deductible and a doughnut hole

D. Cattel (), R. C. Kleef () and R. C. J. A. Vliet ()
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D. Cattel: Erasmus University Rotterdam
R. C. Kleef: Erasmus University Rotterdam
R. C. J. A. Vliet: Erasmus University Rotterdam

The European Journal of Health Economics, 2017, vol. 18, issue 8, No 5, 987-1000

Abstract: Abstract Many health insurance schemes include deductibles to provide consumers with cost containment incentives (CCI) and to counteract moral hazard. Policymakers are faced with choices on the implementation of a specific cost sharing design. One of the guiding principles in this decision process could be which design leads to the strongest CCI. Despite the vast amount of literature on the effects of cost sharing, the relative effects of specific cost sharing designs—e.g., a traditional deductible versus a doughnut hole—will mostly be absent for a certain context. This papers aims at developing a simulation model to approximate the relative effects of different deductible modalities on the CCI. We argue that the CCI depends on the probability that healthcare expenses end up in the deductible range and the expected healthcare expenses given that they end up in the deductible range. Our empirical application shows that different deductible modalities result in different CCIs and that the CCI under a certain modality differs across risk-groups.

Keywords: Health insurance; Moral hazard; Deductibles; Cost containment; Expected health expenses; Incentives (search for similar items in EconPapers)
JEL-codes: C10 D84 G22 I10 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10198-016-0843-9

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