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Genetic testing with primary prevention and moral hazard

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  • David Bardey

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  • Philippe De Donder

    ()

Abstract

We develop a model where a genetic test reveals whether an individual has a low or high probability of developing a disease. A costly prevention effort allows high-risk agents to decrease this probability. Agents are not obliged to take the test, but must disclose its results to insurers, and taking the test is associated to a discrimination risk.We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. If effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor toolow. If the effort cost is not observable by insurers, moral hazard increases the valueof the test if the effort cost is low. We offer several policy recommendations, from theoptimal breadth of the tests to policies to do away with the discrimination risk.

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Bibliographic Info

Paper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 009798.

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Length: 48
Date of creation: 13 Jul 2012
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Handle: RePEc:col:000089:009798

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Keywords: discrimination risk; informational value of test; personalized medicine.;

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  1. Francesca Barigozzi & Dominique Henriet, 2011. "Genetic Information: Comparing Alternative Regulatory Approaches When Prevention Matters," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(1), pages 23-46, 02.
  2. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
  3. Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
  4. Hoy, Michael & Polborn, Mattias, 2000. "The value of genetic information in the life insurance market," Journal of Public Economics, Elsevier, vol. 78(3), pages 235-252, November.
  5. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-73, June.
  6. Strohmenger, R. & Wambach, A., 2000. "Adverse selection and categorical discrimination in the health insurance markets: the effects of genetic tests," Journal of Health Economics, Elsevier, vol. 19(2), pages 197-218, March.
  7. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
  8. Ray REES & Patricia APPS, 2006. "Genetic testing, income distribution and insurance Markets," Annales d'Economie et de Statistique, ENSAE, issue 83-84, pages 353-368.
  9. Lilia Filipova & Michael Hoy, 2009. "Impact of Genetic Testing on Surveillance and Prevention," Working Papers 0904, University of Guelph, Department of Economics and Finance.
  10. Doherty, Neil A. & Thistle, Paul D., 1996. "Adverse selection with endogenous information in insurance markets," Journal of Public Economics, Elsevier, vol. 63(1), pages 83-102, December.
  11. Bardey, David & Lesur, Romain, 2005. "Optimal health insurance contract: Is a deductible useful?," Economics Letters, Elsevier, vol. 87(3), pages 313-317, June.
  12. Dhaval Dave & Robert Kaestner, 2006. "Health Insurance and Ex Ante Moral Hazard: Evidence from Medicare," NBER Working Papers 12764, National Bureau of Economic Research, Inc.
  13. Michael Hoel & Tor Iversen, 2001. "Genetic Testing When There is a Mix of Compulsory and Voluntary Health Insurance," CESifo Working Paper Series 495, CESifo Group Munich.
  14. Ray Rees & Patricia Apps, 2006. "Genetic testing, income distribution and insurance markets, CHERE Working Paper 2006/3," Working Papers 2006/3, CHERE, University of Technology, Sydney.
  15. Hoel, Michael & Iversen, Tor & Nilssen, Tore & Vislie, Jon, 2006. "Genetic testing in competitive insurance markets with repulsion from chance: A welfare analysis," Journal of Health Economics, Elsevier, vol. 25(5), pages 847-860, September.
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Cited by:
  1. Lagerlöf, Johan N. M. & Schottmüller, Christoph, 2013. "Monopoly Insurance with Endogenous Information," CEPR Discussion Papers 9774, C.E.P.R. Discussion Papers.
  2. Simeon Schudy & Verena Utikal, 2012. "The Influence of (Im)perfect Data Privacy on the Acquisition of Personal Health Data," Working Paper Series of the Department of Economics, University of Konstanz 2012-12, Department of Economics, University of Konstanz.
  3. Filipova-Neumann, Lilia & Hoy, Michael, 2014. "Managing genetic tests, surveillance, and preventive medicine under a public health insurance system," Journal of Health Economics, Elsevier, vol. 34(C), pages 31-41.
  4. Goulão, Catarina & Thibault, Emmanuel, 2013. "Physical Activity and Policy Recommendations: a Social Multiplier Approach," TSE Working Papers 13-414, Toulouse School of Economics (TSE).

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