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Patient cost sharing: Reforms without evidence. Theoretical considerations and empirical findings from industrialized countries

  • Holst, Jens

International health service research reveals a uniform tendency in practically all industrialised countries: an increasing shift of costs from solidarity-based financing to private households. Legislators and advisors usually justify this policy through the need to encourage cost-consciousness and especially individual responsibility. Economists consider cost-sharing in health care to be necessary to prevent abuse of the welfare state. They expect user charges and co-payments to motivate a more rational utilisation of health care and, thus, the financial stabilisation of health systems. Many politicians and economists base their assumptions about the health market on the theorem of demand-side moral hazard. This model transforms patients into rational utility maximisers consuming services beyond their needs thereby causing welfare losses to society as a whole. Moral hazard in health insurance belongs to the standard repertoires of economic textbooks. The present study analyses the extensive theoretical and empirical literature on patient cost-sharing published during the last forty years. The results show that persuasive evidence for demand-side moral hazard is still lacking. Furthermore, the claimed empiricism turns out to be inappropriate for providing evidence. Science health service research and clinical studies instead suggest that health insurance beneficiaries are not aiming to abuse the health system. In fact, introducing patient cost-sharing seems to endanger proper health care since it deters the sick from claiming benefits. The idea of rational use transpires to be out of touch with reality. After a systematic in-depth review of current research on the topic, the author concludes that moral hazard in health insurance is a bogey of academic economic theory. Adequate reality-based evidence for implementing patient user fees and co-payments is lacking. In view of the detrimental effects on health service utilisation, he advises cancelling existing co-payment arrangements and abandoning cost-sharing policies.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Group Public Health with number SP I 2010-303.

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Date of creation: 2010
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Handle: RePEc:zbw:wzbhea:spi2010303
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  1. Lostao, Lourdes & Regidor, Enrique & Geyer, Siegfried & Aïach, Pierre, 2007. "Patient cost sharing and social inequalities in access to health care in three western European countries," Social Science & Medicine, Elsevier, vol. 65(2), pages 367-376, July.
  2. Mark V. Pauly & Fredric E. Blavin, 2007. "Value Based Cost Sharing Meets the Theory of Moral Hazard: Medical Effectiveness in Insurance Benefits Design," NBER Working Papers 13044, National Bureau of Economic Research, Inc.
  3. Mark Nuijten & Agota Szende & Jozsef Kosa & Zsolt Mogyorosy & Boris Kramberger & Karel Nemecek & Dominik Tomek & Stjepan Oreskovic & Monika Laskowska, 2003. "Health care reform in six Central European countries," The European Journal of Health Economics, Springer, vol. 4(4), pages 286-291, December.
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  7. Martin Schellhorn, 2002. "Auswirkungen wählbarer Selbstbehalte in der Krankenversicherung: Lehren aus der Schweiz?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 71(4), pages 411-426.
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  10. Pauly, Mark V. & Ramsey, Scott D., 1999. "Would you like suspenders to go with that belt? An analysis of optimal combinations of cost sharing and managed care," Journal of Health Economics, Elsevier, vol. 18(4), pages 443-458, August.
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