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Separating selection and incentive effects in health insurance

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  • Lucien Gardiol

    (IEMS - Institut d'économie et de management de la santé - Université de Lausanne)

  • Pierre-Yves Geoffard

    (IEMS - Institut d'économie et de management de la santé - Université de Lausanne, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris, CEPR - Center for Economic Policy Research - CEPR)

  • Chantal Grandchamp

    (IEMS - Institut d'économie et de management de la santé - Université de Lausanne)

Abstract

This paper provides an analysis of the health insurance and health care consumption. A structural microeconomic model of joint demand for health insurance and health care is developed and estimated using full maximum likelihood method using Swiss insurance claims data for over 60 000 adult individuals. The estimation strategy relies on the institutional features of the Swiss system, in which each individual chooses among the same menu of contracts, ranked by the size of their deductible. The empirical analysis shows strong and robust evidence of selection effects. Nevertheless, once selection effects are controlled for, an important incentive effect ("ex-post moral hazard") remains. A decrease in the copayment rate from 100% to 10% increases the marginal demand for health care by about 90% and from 100% to 0% by about 150%. The correlation between insurance coverage and health care expenditures may be decomposed into the two effects: 75% may be attributed to selection, and 25 % to incentive effects.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00590713.

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Date of creation: Oct 2005
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Handle: RePEc:hal:psewpa:halshs-00590713

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Related research

Keywords: health insurance ; demand for health care ; moral hazard ; adverse selection ; full maximum likelihood estimation;

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References

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  1. Chiappori, P.A. & Durand, F. & Geoffard, P.Y., 1998. "Moral Hazard and the Demand for Physician Services: First Lessons from a French Natural Experiment," DELTA Working Papers 98-05, DELTA (Ecole normale supérieure).
  2. Mullahy, John, 1998. "Much ado about two: reconsidering retransformation and the two-part model in health econometrics," Journal of Health Economics, Elsevier, vol. 17(3), pages 247-281, June.
  3. Pierre-André Chiappori & Bernard Salanié, 1997. "Testing for Asymmetric Information in Insurance Markets," Working Papers 97-11, Centre de Recherche en Economie et Statistique.
  4. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
  5. Cardon, James H & Hendel, Igal, 2001. "Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 408-27, Autumn.
  6. Keeler, Emmett B & Newhouse, Joseph P & Phelps, C E, 1977. "Deductibles and the Demand for Medical Care Services: The Theory of a Consumer Facing a Variable Price Schedule under Uncertainty," Econometrica, Econometric Society, vol. 45(3), pages 641-55, April.
  7. Lucien Gardiol & Pierre-Yves Geoffard & Chantal Grandchamp, 2003. "Separating Selection and Incentive Effects: an Econometric Study of Swiss Health Insurance Claims Data," DELTA Working Papers 2003-27, DELTA (Ecole normale supérieure).
  8. David M. Cutler & Sarah J. Reber, 1998. "Paying For Health Insurance: The Trade-Off Between Competition And Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 433-466, May.
  9. Holly, Alberto & Gardiol, Lucien & Domenighetti, Gianfranco & Brigitte Bisig, 1998. "An econometric model of health care utilization and health insurance in Switzerland," European Economic Review, Elsevier, vol. 42(3-5), pages 513-522, May.
  10. Cameron, A C & P. K. Trivedi & Frank Milne & J. Piggott, 1988. "A Microeconometric Model of the Demand for Health Care and Health Insurance in Australia," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 85-106, January.
  11. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
  12. 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.
  13. Eichner, Matthew J, 1998. "The Demand for Medical Care: What People Pay Does Matter," American Economic Review, American Economic Association, vol. 88(2), pages 117-21, May.
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Citations

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Cited by:
  1. Erik Schokkaert & Tom van Ourti & Diane De Grave & Ann Lecluyse & Carine Van De Voorde, 2007. "Supplemental health insurance and equality of access in Belgium," Center for Economic Studies - Discussion papers ces0729, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Chantal Grandchamp & Lucien Gardiol, 2008. "Does a mandatory telemedicine call prior to visiting a physician reduce costs or simply attract good risks?," Working Papers 0801, University of Lausanne, Institute of Health Economics and Management (IEMS).
  3. Legal, Renaud & Plisson, Manuel, 2008. "Assurance dépendance, effets de sélection et antisélection," Economics Papers from University Paris Dauphine 123456789/5055, Paris Dauphine University.
  4. World Bank, 2009. "Europe and Central Asia - Health insurance and competition," World Bank Other Operational Studies 3064, The World Bank.
  5. R. Kleef & K. Beck & W. Ven & R. Vliet, 2007. "Does risk equalization reduce the viability of voluntary deductibles?," International Journal of Health Care Finance and Economics, Springer, vol. 7(1), pages 43-58, March.
  6. Michel Grignon & Marc Perronnin & John N. Lavis, 2008. "Does free complementary health insurance help the poor to access health care? Evidence from France," Health Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 203-219.
  7. Trottmann, Maria & Zweifel, Peter & Beck, Konstantin, 2012. "Supply-side and demand-side cost sharing in deregulated social health insurance: Which is more effective?," Journal of Health Economics, Elsevier, vol. 31(1), pages 231-242.
  8. Marcel Bilger & Jean-Paul Chaze, 2008. "What Drives Individual Health Expenditure in Switzerland?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(III), pages 337-358, September.
  9. Pedro Pita Barros & Matilde P. Machado & Anna Sanz de Galdeano, 2005. "Moral Hazard And The Demand For Health Services: A Matching Estimator Approach," Economics Working Papers we055928, Universidad Carlos III, Departamento de Economía.
  10. Pau Olivella & Marcos Vera-Hernandez, 2006. "Testing for adverse selection into private medical insurance," IFS Working Papers W06/02, Institute for Fiscal Studies.
  11. Omar Paccagnella & Vincenzo Rebba & Guglielmo Weber, 2013. "VOLUNTARY PRIVATE HEALTH INSURANCE AMONG THE OVER 50s IN EUROPE," Health Economics, John Wiley & Sons, Ltd., vol. 22(3), pages 289-315, 03.

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