Consumer-Directed Health Care: Can Consumers Look After Themselves?
AbstractIn health care systems today, including those of Switzerland and the United States, participants do not necessarily see the big picture of lifetime health costs and quality of life, and in many systems consumers and providers lack the incentives to manage preventative and chronic care to minimize lifetime private and social health costs. Resource allocation problems induced by asymmetric information and misaligned incentives are exacerbated if consumers fail to have the acuity or perspective needed to make choices consistent with their self-interest when faced with complex health care choices with ambiguous future consequences. This paper examines rationality of consumers’ health perceptions and choices using as a natural experiment the recent introduction in the United States of a highly subsidized market for prescription drug insurance, and draws lessons from this experiment on the practicality of “Consumer Directed Health Care” as an approach to achieving efficient allocation of health care resources by confronting consumers with the full marginal costs of the services they use.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 4805.
Date of creation: 07 Jul 2008
Date of revision:
prescription drugs; health insurance; Medicare Part D;
Other versions of this item:
- Daniel McFadden & Joachim Winter & Florian Heiss, 2008. "Consumer-Directed Health Care: Can Consumers Look After Themselves?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(III), pages 285-307, September.
- I10 - Health, Education, and Welfare - - Health - - - General
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-14 (All new papers)
- NEP-HEA-2008-07-14 (Health Economics)
- NEP-IAS-2008-07-14 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daniel McFadden, 2006. "Free Markets and Fettered Consumers," American Economic Review, American Economic Association, vol. 96(1), pages 5-29, March.
- Florian Heiss & Daniel McFadden & Joachim Winter, 2010.
"Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans,"
in: Research Findings in the Economics of Aging, pages 413-481
National Bureau of Economic Research, Inc.
- Florian Heiss & Daniel McFadden & Joachim Winter, 2007. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," NBER Working Papers 13627, National Bureau of Economic Research, Inc.
- Daniel McFadden & Carlos Noton & Pau Olivella, 2012.
"Remedies for Sick Insurance,"
620, Barcelona Graduate School of Economics.
- Daniel L. McFadden & Carlos E. Noton & Pau Olivella, 2012. "Remedies for Sick Insurance," NBER Working Papers 17938, National Bureau of Economic Research, Inc.
- Daniel McFadden & Carlos Noton & Pau Olivella, 2013. "Remedies for Sick Insurance," Documentos de Trabajo 302, Centro de Economía Aplicada, Universidad de Chile.
- Daniel McFadden, 2009. "The human side of mechanism design: a tribute to Leo Hurwicz and Jean-Jacque Laffont," Review of Economic Design, Springer, vol. 13(1), pages 77-100, April.
- Florian Heiss & Daniel McFadden & Joachim Winter, 2011. "The Demand for Medicare Part D Prescription Drug Coverage: Evidence from Four Waves of the Retirement Perspectives Survey," NBER Chapters, in: Explorations in the Economics of Aging, pages 159-182 National Bureau of Economic Research, Inc.
- Kesternich, Iris & Heiss, Florian & McFadden, Daniel & Winter, Joachim, 2012. "Suit the action to the word, the word to the action: Hypothetical choices and real decisions in Medicare Part D," Discussion Papers in Economics 14124, University of Munich, Department of Economics.
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