Optimal health insurance for multiple goods and time periods

Randall Ellis, Shenyi Jian and Willard Manning
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Shenyi Jian: Renmin University of China

No wp2015-019, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

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.

Pages: 56
Date: 2015
New Economics Papers: this item is included in nep-hea and nep-ias
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Citations: View citations in EconPapers (5)

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