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

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  • Steinorth, Petra
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    Abstract

    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.

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    Bibliographic Info

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

    Volume (Year): 30 (2011)
    Issue (Month): 2 (March)
    Pages: 458-465

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    Handle: RePEc:eee:jhecon:v:30:y:2011:i:2:p:458-465

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

    Related research

    Keywords: Health savings accounts Health risk Precautionary savings Prevention effort Health insurance;

    References

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    1. 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.
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    3. 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.
    4. CHIU, W. Henry & EECKHOUDT, Louis & REY, Béatrice, . "On relative and partial risk attitudes: theory and implications," CORE Discussion Papers RP -2431, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    6. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
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    8. 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 623-48, July-Aug..
    9. Tullio Jappelli & Luigi Pistaferri & Guglielmo Weber, 2006. "Health Care Quality, Economic Inequality, and Precautionary Saving," "Marco Fanno" Working Papers 0020, Dipartimento di Scienze Economiche "Marco Fanno".
    10. Martha Starr-McCluer, 1994. "Health insurance and precautionary saving," Finance and Economics Discussion Series 94-10, Board of Governors of the Federal Reserve System (U.S.).
    11. 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.
    12. 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.
    13. 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.
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    Cited by:
    1. 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.
    2. Song Chen & Anthony Lo Sasso & Aneesh Nandam, 2013. "Who funds their health savings account and why?," International Journal of Health Care Finance and Economics, Springer, vol. 13(3), pages 219-232, December.

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