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Incentivizing efficient utilization without reducing access: The case against cost-sharing in insurance

Markus Fels

No 105, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: Cost-sharing is regarded as an important tool to reduce moral hazard in health insurance. Contrary to standard prediction, however, such requirements are found to decrease utilization both of efficient and of inefficient care. I employ a simple model that incorporates two possible explanations - consumer mistakes and limited access - to assess the welfare implications of different insurance designs. I find cost-sharing never to be an optimal solution as it produces two novel inefficiencies by limiting access. An alternative design, relying on bonuses, has no such side effects and achieves the same incentivization.

Keywords: Moral Hazard; Limited Access; Cost-Sharing; Insurance Rebates (search for similar items in EconPapers)
JEL-codes: D82 I13 I14 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ias and nep-reg
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Citations: View citations in EconPapers (1) Track citations by RSS feed

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https://www.econstor.eu/bitstream/10419/163555/1/894217526.pdf (application/pdf)

Related works:
Journal Article: Incentivizing efficient utilization without reducing access: The case against cost‐sharing in insurance (2020) Downloads
Working Paper: Incentivizing Efficient Utilization Without Reducing Access: The Case Against Cost-Sharing in Insurance (2018) Downloads
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