Loss reduction and implicit deductibles in medical insurance

Jacques Dreze

No 2002005, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This note presents a modest extension of the very useful "theorem of the deductible" (Arrow, American Economic Review, 1963). The extension concerns ex post moral hazard in medical insurance. Under full insurance above a deductible, the marginal cost of treatment to the insured is zero, resulting in over-consumption. Co-insurance is the standard approach to mitigate that problem. Assuming that resources and consumption preferences are independent of health (to separate medical insurance from disability insurance), the optimal co-insurance contract results in the same indemnities as a contract with 100% coverageabove a variable deductible, related positively to the elasticity of medical expenditures withresp ect to the coverage rate.

Keywords: health insurance; deductibles; moral hazard (search for similar items in EconPapers)
Date: 2002-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2002.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2002005

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().