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Health Care Demand in the Presence of Discrete Price Changes

Author

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  • Gerfin, M.
  • Kaiser, B.
  • Schmid, C.

Abstract

Deductibles in health insurance generate nonlinear budget sets and dynamic incentives. This paper uses detailed individual claims data from a large Swiss insurance company to estimate the response in health care demand to the discrete price increase that is generated by resetting the deductible at the start of each calendar year. We use a regression discontinuity type framework based on daily data to estimate the change in health care demand right before and right after the turn of the year. We find that for individuals with high deductibles health care demand drops by 27%, which translates into an elasticity of −.21. The decrease is most pronounced for inpatient care and prescription drugs. By contrast, for individuals with low deductibles there is no significant change in health care demand (except for prescription drugs). A remaining open question is whether the observed behavioral responses can be attributed to intertemporal substitution or whether they constitute a classic moral hazard effect.

Suggested Citation

  • Gerfin, M. & Kaiser, B. & Schmid, C., 2014. "Health Care Demand in the Presence of Discrete Price Changes," Health, Econometrics and Data Group (HEDG) Working Papers 14/22, HEDG, c/o Department of Economics, University of York.
    • Handle: RePEc:yor:hectdg:14/22
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    2. Klein, Tobias & Salm, Martin & Upadhyay, Suraj, 2020. "The Response to Dynamic Incentives in Insurance Contracts with a Deductible: Evidence from a Differences-in-Regression-Disconti," CEPR Discussion Papers 14552, C.E.P.R. Discussion Papers.
    3. Rosalind Bell-Aldeghi & Nicolas Sirven & Morgane Guern & Christine Sevilla-Dedieu, 2022. "One last effort. Are high out-of-pocket payments at the end of life a fatality?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(5), pages 879-891, July.
    4. Stefanie Thönnes, 2019. "Ex-post moral hazard in the health insurance market: empirical evidence from German data," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(9), pages 1317-1333, December.
    5. Schmid, Christian P.R. & Beck, Konstantin, 2016. "Re-insurance in the Swiss health insurance market: Fit, power, and balance," Health Policy, Elsevier, vol. 120(7), pages 848-855.
    6. M. Antonini & R. C. van Kleef & J. Henriquez & F. Paolucci, 2023. "Can risk rating increase the ability of voluntary deductibles to reduce moral hazard?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(1), pages 130-156, January.
    7. Kaufmann, Cornel & Müller, Tobias & Hefti, Andreas & Boes, Stefan, 2018. "Does personalized information improve health plan choices when individuals are distracted?," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 197-214.
    8. Stefan Pichler & Jan Ruffner, 2016. "Does it really make a difference? Health care utilization with two high deductible health care plans," KOF Working papers 16-404, KOF Swiss Economic Institute, ETH Zurich.
    9. Klein, Tobias J. & Salm, Martin & Upadhyay, Suraj, 2022. "The response to dynamic incentives in insurance contracts with a deductible: Evidence from a differences-in-regression-discontinuities design," Journal of Public Economics, Elsevier, vol. 210(C).
    10. Kaufmann, Cornel & Schmid, Christian & Boes, Stefan, 2017. "Health insurance subsidies and deductible choice: Evidence from regional variation in subsidy schemes," Journal of Health Economics, Elsevier, vol. 55(C), pages 262-273.
    11. Suppliet, Moritz & Herr, Annika, 2016. "Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets," Other publications TiSEM 4d692f0e-8577-4392-b413-2, Tilburg University, School of Economics and Management.
    12. Tamara Bischof & Michael Gerfin & Tobias Mueller, 2021. "Attention Please! Health Plan Choice and (In-)Attention," Diskussionsschriften dp2111, Universitaet Bern, Departement Volkswirtschaft.
    13. Salvi, Irene & Cordier, Johannes & Kuklinski, David & Vogel, Justus & Geissler, Alexander, 2023. "Price sensitivity and demand for healthcare services: Investigating demand-side financial incentives using anonymised claims data from Switzerland," Working Paper Series in Health Economics, Management and Policy 2023-06, University of St.Gallen, School of Medicine, Chair of Health Economics, Policy and Management.
    14. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2017. "A voluntary deductible in health insurance: the more years you opt for it, the lower your premium?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 209-226, March.

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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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