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The Economics of Incentive-Based Health Care Plans


  • Dennis Heffley

    (University of Connecticut)

  • Thomas J. Miceli

    (University of Connecticut)


Medical savings accounts (MSAs) belong to a larger class of incentive-based health care plans. Using a model that allows the consumer to invest in healthy activities, we examine the efficiency properties of incentive plans and compare them to traditional full- coverage and deductible plans, under both experience rating and community rating. The model also is extended to include utilization of preventive health care. Properly constructed incentive plans have the capacity to induce socially efficient levels of healthy activities and preventive care, raising the expected wealth of consumers without reducing insurers' profits.

Suggested Citation

  • Dennis Heffley & Thomas J. Miceli, 1997. "The Economics of Incentive-Based Health Care Plans," Working papers 1997-05, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:1997-05

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    References listed on IDEAS

    1. Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
    2. Joseph P. Newhouse, 1996. "Policy Watch: Medicare," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 159-167, Summer.
    3. Selden, Thomas M., 1990. "A model of capitation," Journal of Health Economics, Elsevier, vol. 9(4), pages 397-409, December.
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    Cited by:

    1. Query, J. Tim, 2000. "An analysis of the Medical Savings Account as an alternative retirement savings Vehicle," Financial Services Review, Elsevier, pages 107-123.

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