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Can Health Savings Account Reduce Health Spending?: Evidence from China

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  • Tianxu Chen

    (University of Connecticut)

Abstract

Health care costs are high and rising in most major economies, and health savings account (HSA) is often viewed as an appealing way to contain health care costs because it can potentially solve the moral hazard spending caused by traditional health insurance. In this paper, I use the China Household Finance Survey to empirically examine the effectiveness of HSAs in containing medical expenses and reducing moral hazard. I find that HSAs that restrict the use of funds may lead enrollees to discount the value and thus spend more on health care. In addition, I find that the positive effect of HSAs on medical expenses is larger for the relatively healthier group, which may suggest that moral hazard behavior exists with regard to the use of HSA funds. The empirical estimates of the effect of HSAs on medical expenses are robust when a set of covariates are controlled, and HSA balances are instrumented using housing savings account balances.

Suggested Citation

  • Tianxu Chen, 2019. "Can Health Savings Account Reduce Health Spending?: Evidence from China," Working papers 2019-08, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2019-08
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    References listed on IDEAS

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    More about this item

    Keywords

    Health savings account; medical expense; risk behavior; China;

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • J1 - Labor and Demographic Economics - - Demographic Economics

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