Health insurance: Medical treatment vs disability payment |
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| Authors: | Geir B Asheim Anne Wenche Emblem Tore Nilssen |
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| Institution: | 1. University of Oslo, Norway;2. Sørlandet Hospital, Norway;3. University of Agder, Norway;1. CRIISEA, University of Picardie, France;2. Le STUDIUM, University of Orleans, France;3. Texas Christian University, USA;4. University of Orleans, France;1. University of Zurich, Swiss Finance Institute, CEPR, Switzerland;2. George Mason University School of Law, 3301 N. Fairfax Drive, Arlington, VA 22201, United States;1. School of Science, Tianjin University of Commerce, Tianjin, China;2. The Research Center for Applied Statistics of Renmin University of China, Beijing, China;3. Department of Statistics, Tianjin University of Finance and Economics, Tianjin, China |
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| Abstract: | We present arguments for treating health insurance and disability insurance in an integrated manner in economic analysis, based on a model where each individual’s utility depends on both consumption and health and her income depends on her earning ability. When purchasing insurance, she may choose a contract that offers less than full medical treatment. We find that high-ability individuals demand full recovery and equalize utility across states, while low-ability individuals demand partial treatment and cash compensation and suffer a loss in utility if ill. Our results carry over to the case where health states are not observable. |
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