A Structural Microsimulation Model for Demand-Side Cost-Sharing in Healthcare

Demand-side cost-sharing schemes reduce moral hazard in healthcare at the expense of out-of-pocket risk and equity. With a structural microsimulation model, we show that shifting the starting point of the deductible away from zero to 400 euros for all insured individuals, leads to an average 4 percent reduction in healthcare expenditure and 47 percent lower out-of-pocket payments. We use administrative healthcare expenditure data and focus on the price elastic part of the Dutch population to analyze the differences between the cost-sharing schemes. The model is estimated with a Bayesian mixture model to capture distributions of healthcare expenditure with which we predict the effects of cost-sharing schemes that are not present in our data.