Patient Cost-Sharing and Redistribution in Health Insurance

Tobias Klein, Martin Salm () and Suraj Upadhyay
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Martin Salm: Tilburg University
Suraj Upadhyay: Tilburg University

No 16778, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: health insurance; moral hazard; patient cost-sharing; redistribution (search for similar items in EconPapers)
JEL-codes: I13 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2024-01
New Economics Papers: this item is included in nep-hea
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