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Risk equalization and voluntary deductibles: A complex interaction

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  • van Kleef, R.C.
  • Beck, K.
  • van de Ven, W.P.M.M.
  • van Vliet, R.C.J.A.
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    Abstract

    The presence of voluntary deductibles in the Swiss and Dutch mandatory health insurance has important implications for the respective risk equalization systems. In a theoretical analysis, we discuss the consequences of equalizing three types of expenditures: the net claims that are reimbursed by the insurer, the out-of-pocket expenditures and the expenditure savings due to moral hazard reduction. Equalizing only the net claims, as done in Switzerland, creates incentives for cream skimming and prevents insurers from incorporating out-of-pocket expenditures and moral hazard reductions into their premium structure. In an empirical analysis, we examine the effect of self-selection and conclude that the Swiss and Dutch risk equalization systems do not fully adjust for differences in health status between those who choose a deductible and those who do not. We discuss how this may lead to incentives for cream skimming and to a reduction of cross-subsidies from healthy to unhealthy individuals compared to a situation without voluntary deductibles.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 27 (2008)
    Issue (Month): 2 (March)
    Pages: 427-443

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    Handle: RePEc:eee:jhecon:v:27:y:2008:i:2:p:427-443

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    Web page: http://www.elsevier.com/locate/inca/505560

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    1. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
    2. Willard G. Manning & John Mullahy, 1999. "Estimating Log Models: To Transform or Not to Transform?," NBER Technical Working Papers 0246, National Bureau of Economic Research, Inc.
    3. Beck, Konstantin & Spycher, Stefan & Holly, Alberto & Gardiol, Lucien, 2003. "Risk adjustment in Switzerland," Health Policy, Elsevier, vol. 65(1), pages 63-74, July.
    4. Keeler, Emmett B. & Rolph, John E., 1988. "The demand for episodes of treatment in the health insurance experiment," Journal of Health Economics, Elsevier, vol. 7(4), pages 337-367, December.
    5. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-26, April.
    6. Lamers, Leida M., 1998. "Risk-adjusted capitation payments: Developing a diagnostic cost groups classification for the Dutch situation," Health Policy, Elsevier, vol. 45(1), pages 15-32, July.
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    Cited by:
    1. Janko Gorter & Paul Schilp, 2012. "Risk preferences over small stakes: Evidence from deductible choice," DNB Working Papers 338, Netherlands Central Bank, Research Department.
    2. repec:ner:leuven:urn:hdl:123456789/119264 is not listed on IDEAS
    3. Trottmann, Maria & Zweifel, Peter & Beck, Konstantin, 2012. "Supply-side and demand-side cost sharing in deregulated social health insurance: Which is more effective?," Journal of Health Economics, Elsevier, vol. 31(1), pages 231-242.
    4. Richard C. van Kleef, 2012. "Managed competition in the Dutch Health Care System: Preconditions and experiences so far," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(2), pages 145-170, July.

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