Reducing Medical Spending of the Publicly Insured: The Case for a Cash-Out Option
Svetlana Pashchenko () and
Ponpoje Porapakkarm ()
No 2018-080, Working Papers from Human Capital and Economic Opportunity Working Group
Individuals' medical spending has both necessary and discretionary components which are not, however, separately observable. This paper studies ways to improve upon existing public health insurance policies by using a framework where both the discretionary and necessary components of medical spending are explicitly modeled. First, using a simple theoretical framework the paper shows that the key to reducing discretionary medical spending is to introduce a trade-off between non-medical and medical consumption. Next, using a rich quantitative life-cycle model the paper shows that this trade-off can be successfully implemented by introducing an option to substitute public health insurance with cash transfers.
Keywords: medical spending; health insurance; optimal taxation; life-cycle model; ex-post moral hazard (search for similar items in EconPapers)
JEL-codes: D52 D91 E21 H53 I13 I18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hea, nep-ias and nep-mac
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Pashch ... medical-spending.pdf First version, September 26, 2018 (application/pdf)
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