IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v30y2011i2p458-465.html
   My bibliography  Save this article

Impact of health savings accounts on precautionary savings, demand for health insurance and prevention effort

Author

Listed:
  • Steinorth, Petra

Abstract

The paper examines the influence of health savings accounts (HSAs) on optimal savings, insurance demand and prevention effort over the course of a lifetime. This paper adds to the literature by investigating HSAs as both a form of insurance and as saving vehicle in an expected utility framework. Assuming no regulatory constraints on the deductible, we show that individuals voluntarily choose a positive deductible and increase their savings with HSAs. If the government-imposed minimum deductible becomes too great, however, individuals may instead choose to remain in traditional insurance. We determine the effect of HSAs on prevention effort. We find that an increased tax subsidy may worsen moral hazard issues. Assuming partial risk aversion to be less than or equal to one, individuals will either invest less in the health preservation effort and more money in the HSA or vice versa. However, they will never increase both effort and savings simultaneously as was intended when HSAs were introduced.

Suggested Citation

  • Steinorth, Petra, 2011. "Impact of health savings accounts on precautionary savings, demand for health insurance and prevention effort," Journal of Health Economics, Elsevier, vol. 30(2), pages 458-465, March.
    • Handle: RePEc:eee:jhecon:v:30:y:2011:i:2:p:458-465
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-6296(11)00003-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jonathan Gruber & Aaron Yelowitz, 1999. "Public Health Insurance and Private Savings," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1249-1274, December.
    2. David M. Cutler & Richard J. Zeckhauser, 1998. "Adverse Selection in Health Insurance," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 1-32, National Bureau of Economic Research, Inc.
    3. Tullio Jappelli & Luigi Pistaferri & Guglielmo Weber, 2007. "Health care quality, economic inequality, and precautionary saving," Health Economics, John Wiley & Sons, Ltd., vol. 16(4), pages 327-346, April.
    4. Cardon, James H. & Showalter, Mark H., 2007. "Insurance choice and tax-preferred health savings accounts," Journal of Health Economics, Elsevier, vol. 26(2), pages 373-399, March.
    5. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643, Elsevier.
    6. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    7. W. Chiu & Louis Eeckhoudt & Beatrice Rey, 2012. "On relative and partial risk attitudes: theory and implications," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(1), pages 151-167, May.
    8. Starr-McCluer, Martha, 1996. "Health Insurance and Precautionary Savings," American Economic Review, American Economic Association, vol. 86(1), pages 285-295, March.
    9. Zabinski, Daniel & Selden, Thomas M. & Moeller, John F. & Banthin, Jessica S., 1999. "Medical savings accounts: microsimulation results from a model with adverse selection," Journal of Health Economics, Elsevier, vol. 18(2), pages 195-218, April.
    10. Jessica Greene & Judith Hibbard & Anna Dixon & Martin Tusler, 2006. "Which consumers are ready for consumer-directed health plans?," Journal of Consumer Policy, Springer, vol. 29(3), pages 247-262, September.
    11. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    12. James H. Cardon & Mark H. Showalter, 2003. "Flexible Spending Accounts as Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(1), pages 43-51, March.
    13. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 465-473.
    14. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459, Elsevier.
    15. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Padmaja Ayyagari & Daifeng He, 2017. "The Role of Medical Expenditure Risk in Portfolio Allocation Decisions," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1447-1458, November.
    2. Jessica Leight & Nicholas Wilson, 2020. "Framing Flexible Spending Accounts: A Large‐Scale Field Experiment on Communicating the Return on Medical Savings Accounts," Health Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 195-208, February.
    3. Donatella Baiardi & Marco Magnani & Mario Menegatti, 2020. "The theory of precautionary saving: an overview of recent developments," Review of Economics of the Household, Springer, vol. 18(2), pages 513-542, June.
    4. Richard Peter & Sebastian Soika & Petra Steinorth, 2016. "Health Insurance, Health Savings Accounts and Healthcare Utilization," Health Economics, John Wiley & Sons, Ltd., vol. 25(3), pages 357-371, March.
    5. Desu Liu & Mario Menegatti, 2019. "Optimal saving and health prevention," Journal of Economics, Springer, vol. 128(2), pages 177-191, October.
    6. Song Chen & Anthony Lo Sasso & Aneesh Nandam, 2013. "Who funds their health savings account and why?," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 219-232, December.
    7. Mario Menegatti, 2021. "Risk aversion in two-period rent-seeking games," Public Choice, Springer, vol. 188(1), pages 269-287, July.
    8. Ghislando, S & Manachotphong, W & Perego, VME, 2013. "The impact of Universal Health Coverage on healthcare consumption and risky behaviours: evidence from Thailand," Working Papers 11200, Imperial College, London, Imperial College Business School.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heinzel Christoph & Richard Peter, 2021. "Precautionary motives with multiple instruments," Working Papers SMART 21-09, INRAE UMR SMART.
    2. Nocetti Diego & Smith William T, 2010. "Uncertainty, the Demand for Health Care, and Precautionary Saving," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-31, August.
    3. Richard Peter & Sebastian Soika & Petra Steinorth, 2016. "Health Insurance, Health Savings Accounts and Healthcare Utilization," Health Economics, John Wiley & Sons, Ltd., vol. 25(3), pages 357-371, March.
    4. Christoph Heinzel & Richard Peter, 2021. "Precautionary motives with multiple instruments [Motifs de précaution en cas de multiples instruments]," Working Papers hal-03484875, HAL.
    5. Heinzel, Christoph & Peter, Richard, 2021. "Precautionary motives with multiple instruments," Working Papers 316521, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    6. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2017. "A voluntary deductible in health insurance: the more years you opt for it, the lower your premium?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 209-226, March.
    7. Lee, Daeyong, 2016. "Effects of dependent coverage mandate on household precautionary savings: Evidence from the 2010 Affordable Care Act," Economics Letters, Elsevier, vol. 147(C), pages 32-37.
    8. Johannes Geyer, 2011. "The Effect of Health and Employment Risks on Precautionary Savings," SOEPpapers on Multidisciplinary Panel Data Research 408, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
    10. Cardon, James H. & Showalter, Mark H., 2007. "Insurance choice and tax-preferred health savings accounts," Journal of Health Economics, Elsevier, vol. 26(2), pages 373-399, March.
    11. Perronnin, Marc, 2013. "Effet de l'assurance complémentaire santé sur les consommations médicales, entre risque moral et amélioration de l'accès aux soins," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13659 edited by Wittwer, Jérôme.
    12. Çağatay Koç, 2005. "Health‐Specific Moral Hazard Effects," Southern Economic Journal, John Wiley & Sons, vol. 72(1), pages 98-118, July.
    13. Shin-Yi Chou & Jin-Tan Liu & Cliff J. Huang, 2004. "Health insurance and savings over the life cycle-a semiparametric smooth coefficient estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(3), pages 295-322.
    14. Christophe Courbage & Richard Peter & Béatrice Rey, 2022. "Incentive and welfare effects of correlated returns," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(1), pages 5-34, March.
    15. Stefan Boes & Michael Gerfin, 2016. "Does Full Insurance Increase the Demand for Health Care?," Health Economics, John Wiley & Sons, Ltd., vol. 25(11), pages 1483-1496, November.
    16. Chiu, W. Henry, 2019. "Comparative statics in an ordinal theory of choice under risk," Mathematical Social Sciences, Elsevier, vol. 101(C), pages 113-123.
    17. Courbage, Christophe & Rey, Béatrice, 2012. "Priority setting in health care and higher order degree change in risk," Journal of Health Economics, Elsevier, vol. 31(3), pages 484-489.
    18. Ellis, Randall P. & Manning, Willard G., 2007. "Optimal health insurance for prevention and treatment," Journal of Health Economics, Elsevier, vol. 26(6), pages 1128-1150, December.
    19. Diego Nocetti & William T. Smith, 2011. "Precautionary Saving and Endogenous Labor Supply with and without Intertemporal Expected Utility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(7), pages 1475-1504, October.
    20. Schneider, Sebastian O. & Sutter, Matthias, 2020. "Higher Order Risk Preferences: Experimental Measures, Determinants and Related Field Behavior," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224643, Verein für Socialpolitik / German Economic Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:30:y:2011:i:2:p:458-465. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.