IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v28y2009i1p198-209.html
   My bibliography  Save this article

Shifted deductibles for high risks: More effective in reducing moral hazard than traditional deductibles

Author

Listed:
  • van Kleef, R.C.
  • van de Ven, W.P.M.M.
  • van Vliet, R.C.J.A.

Abstract

In health insurance, a traditional deductible (i.e. with a deductible range [0,d]) is in theory not effective in reducing moral hazard for individuals who know (ex-ante) that their expenditures will exceed the deductible amount d, e.g. those with a chronic disease. To increase the effectiveness, this paper proposes to shift the deductible range to [si,si + d], with starting point si depending on relevant risk characteristics of individual i. In an empirical illustration we assume the optimal shift to be such that the variance in out-of-pocket expenditures is maximized. Results indicate that for the 10-percent highest risks in our data the optimal starting point of a [euro]1000-deductible is to be found (far) beyond [euro]1200, which corresponds with a deductible range of [1200,2200] or further. We conclude that, compared to traditional deductibles, shifted deductibles with a risk-adjusted starting point lower out-of-pocket expenditures and may further reduce moral hazard.

Suggested Citation

  • van Kleef, R.C. & van de Ven, W.P.M.M. & van Vliet, R.C.J.A., 2009. "Shifted deductibles for high risks: More effective in reducing moral hazard than traditional deductibles," Journal of Health Economics, Elsevier, vol. 28(1), pages 198-209, January.
  • Handle: RePEc:eee:jhecon:v:28:y:2009:i:1:p:198-209
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-6296(08)00129-X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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 251-277, June.
    2. Michael Breuer, 2005. "Multiple Losses, "EX ANTE" Moral Hazard, and the Implications for Umbrella Policies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(4), pages 525-538.
    3. 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.
    4. 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 641-655, April.
    5. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
    6. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-280, Part I, M.
    7. Joan L. Buchanan & Emmett B. Keeler & John E. Rolph & Martin R. Holmer, 1991. "Simulating Health Expenditures Under Alternative Insurance Plans," Management Science, INFORMS, vol. 37(9), pages 1067-1090, September.
    8. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459 Elsevier.
    9. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-126, April.
    10. Keeler, Emmett B. & Rolph, John E., 1988. "The demand for episodes of treatment in the health insurance experiment," Journal of Health Economics, Elsevier, vol. 7(4), pages 337-367, December.
    11. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.
    12. Chernew, Michael E. & Encinosa, William E. & Hirth, Richard A., 2000. "Optimal health insurance: the case of observable, severe illness," Journal of Health Economics, Elsevier, vol. 19(5), pages 585-609, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Holland, Daniel S. & Jannot, Jason E., 2012. "Bycatch risk pools for the US West Coast Groundfish Fishery," Ecological Economics, Elsevier, vol. 78(C), pages 132-147.
    2. van Winssen, K.P.M. & van Kleef, R.C. & van de Ven, W.P.M.M., 2015. "How profitable is a voluntary deductible in health insurance for the consumer?," Health Policy, Elsevier, vol. 119(5), pages 688-695.
    3. Nicolas R. Ziebarth, 2011. "Assessing the Effectiveness of Health Care Cost Containment Measures," SOEPpapers on Multidisciplinary Panel Data Research 352, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Nicolas Ziebarth, 2014. "Assessing the effectiveness of health care cost containment measures: evidence from the market for rehabilitation care," International Journal of Health Economics and Management, Springer, vol. 14(1), pages 41-67, March.
    5. Anne-Fleur Roos & Frederik Schut, 2012. "Spillover effects of supplementary on basic health insurance: evidence from the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(1), pages 51-62, February.
    6. van Esch, Thamar E.M. & Brabers, Anne E.M. & van Dijk, Christel E. & Gusdorf, Lisette & Groenewegen, Peter P. & de Jong, Judith D., 2017. "Increased cost sharing and changes in noncompliance with specialty referrals in The Netherlands," Health Policy, Elsevier, vol. 121(2), pages 180-188.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:28:y:2009:i:1:p:198-209. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.