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Genetic testing with primary prevention and moral hazard

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  • Bardey, David
  • De Donder, Philippe

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 too low. If the effort cost is not observable by insurers, moral hazard increases the value of the test if the effort cost is low. We offer several policy recommendations, from the optimal breadth of the tests to policies to do away with the discrimination risk.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8977.

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Date of creation: May 2012
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Handle: RePEc:cpr:ceprdp:8977

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Keywords: discrimination risk; informational value of test; personalized medecine;

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  1. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(4), pages 541-62, November.
  2. F. Barigozzi & D. Henriet, 2009. "Genetic Information: Comparing Alternative Regulatory Approaches when Prevention Matters," Working Papers 657, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. 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.
  4. DIONNE, George & EECKHOUDT, Louis, . "Self-insurance, self-protection and increased risk aversion," CORE Discussion Papers RP -623, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 9(4), pages 367-390, December.
  6. Bardey, David & Lesur, Romain, 2005. "Optimal health insurance contract: Is a deductible useful?," Economics Letters, Elsevier, vol. 87(3), pages 313-317, June.
  7. 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.
  8. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
  9. Lilia Filipova & Michael Hoy, 2009. "Impact of Genetic Testing on Surveillance and Prevention," Working Papers, University of Guelph, Department of Economics and Finance 0904, University of Guelph, Department of Economics and Finance.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(3), pages 445-73, June.
  15. Ray Rees & Patricia Apps, 2006. "Genetic testing, income distribution and insurance markets, CHERE Working Paper 2006/3," Working Papers, CHERE, University of Technology, Sydney 2006/3, CHERE, University of Technology, Sydney.
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Cited by:
  1. Goulão, Catarina & Thibault, Emmanuel, 2013. "Physical Activity and Policy Recommendations: a Social Multiplier Approach," IDEI Working Papers 782, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Lagerlöf, Johan N. M. & Schottmüller, Christoph, 2013. "Monopoly Insurance with Endogenous Information," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9774, C.E.P.R. Discussion Papers.
  3. 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.
  4. 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.

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