Patient cost-sharing and redistribution in health insurance

Tobias Klein, Martin Salm and Suraj Upadhyay

No 18395, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Health insurance premiums often do not reflect individual health risks, implying redistribution from individuals with low health risks to individuals with high health risks. This paper studies whether more cost-sharing leads to less redistribution and to lower welfare of high-risk individuals. This could be the case because more cost-sharing increases out-of-pocket payments especially for high-risk individuals. We estimate a structural model of healthcare consumption using administrative data from a Dutch health insurer. We use the model to simulate the effects of a host of counterfactual policies. The policy that was in place was a 350 euro deductible. Our counterfactual experiments show that redistribution would decrease when the deductible would increase. Nonetheless, high-risk individuals can benefit from higher levels of cost-sharing. The reason is that this leads to lower premiums because both high-risk and low-risk individuals strongly react to the financial incentives cost-sharing provides.

JEL-codes: I13 (search for similar items in EconPapers)
Date: 2023-08
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