Efficiency of health care delivery systems: effects of health insurance coverage

Health insurance expansions may increase the demand for care-creating incentives for health systems to increase input consumption. The possibility remains that added capacity and personnel will have little effect on health outcomes, decreasing the technical efficiency of health care delivery systems. We estimate that a 1 percentage point increase in health insurance coverage decreases the technical efficiency of health care delivery by 1.3 percentage points, translating into approximately 50 billion dollars in additional health expenditures. This finding uncovers a previously unexplored consequence of changes in health insurance on the supply side of health care markets suggesting one avenue through which health care costs growth may occur.     

Choice, price competition and complexity in markets for health insurance

The United States and other nations rely on consumer choice and price competition between competing health plans to allocate resources in the health sector. While a great deal of research has examined the efficiency consequences of adverse selection in health insurance markets, less attention has been devoted to other aspects of consumer choice. The nation of Switzerland offers a unique opportunity to study price competition in health insurance markets. Switzerland regulates health insurance markets with the aim of minimizing adverse selection and encouraging strong price competition. We examine consumer responses to price differences in local markets and the degree of price variation in local markets. Using both survey data and observations on local markets we obtain evidence suggesting that as the number of choices offered to individuals grows, their willingness to switch plans given a set of price dispersion differences declines, which allows large price differences for relatively homogeneous products to persist. We consider explanations for this phenomenon from economics and psychology.     

社会医疗保障改革的福利效应:以中国城镇为例

This paper evaluates Chinese public health insurance reform enforced since 1998 in terms of its welfare effects. We evaluate China health insurance reform since 1998 using the China Health and Nutrition Surveys (CHNS) data with relevant econometric models. The results of empirical studies show that the public health insurance status has significant impact on medical service utilization and expenditure. The reform reduces the positive effect of public health insurance on medical service utilization, meaning the utilization gap is narrowed after the reform. However, the empirical studies find that the medical expenditure growth of the sample individuals in urban China has not been controlled after the Basic Medical Insurance (BMI) program even if a new co-payment is enforced. Two main reasons for this failure might be the rising cost of medical service and physician’s severe moral hazard, while both of them come from no managed care mechanism for medical service providers in China.      

Income tax deductions for losses as insurance revisited

Kaplow (1992) shows that allowing income tax deductions for losses as partial insurance is undesirable in the presence of private insurance markets. This paper revisits the issue by considering a model that integrates Kaplow (1992) with Stiglitz (1982). We address the following question: Whether the income tax deduction for losses is part of an optimal income tax system. We show that introducing the income tax deduction for uninsured losses to complement an optimal nonlinear labor income tax will Pareto-improve welfare, provided that: (i) information is incomplete for the government as in the Stiglitz framework, and (ii) the premium for private insurance is unfair or moral hazard is present.     

The wealth effects of premium subsidies on moral hazard in insurance markets

Insurance premium subsidies are present in many insurance markets. The Swiss government, for example, paid out CHF 4.26 billion or 0.72% of the Swiss GDP for health insurance premium subsidies in 2011. Analyses of premium subsidies have often highlighted that the increased insurance demand due to premium subsidies increases the effects of moral hazard in the market. Other consequences of premium subsidies, however, have mostly been neglected by the literature. We show in our theoretical model that the wealth effects of premium subsidies decrease the sensitivity of the insured towards the monetary consequences of losses. This leads to less prevention efforts by the insured and thus increases moral hazard in the market. The effect is preserved if the subsidy is financed through proportional taxation. Using two alternative models, we show that providing state-dependent subsidies can either increase or reverse this effect, depending on which state subsidies are paid. We argue that whether demand effects or wealth effects of premium subsidies will dominate the insured׳s behavior depends on the market structure.     

中国城镇社会医疗保障改革的理论探索

With its transition to a market-oriented economy, China has gone through significant changes in health care delivery and financing systems in the last three decades. Since 1998, a new public health insurance program for urban employees, called Basic Medical Insurance Program (BMI), has been established. One theme of this reform was to control medical service over-consumption with new cost containment methods. This paper attempts to evaluate the effects of the reformed public health insurance on health care utilization, with in-depth theoretical investigation. We formulate a health care demand model based on the structure of health care delivery and health insurance systems in China. It is assumed in the model that physicians have pure monopoly power in determining patients’ health care utilization. The major inference is that the insurance co-payment mechanism cannot reduce medical service over-utilization effectively without any efforts to control physicians’ behavior. Meanwhile, we use the calibrated simulation to demonstrate our hypothesis in the theoretical model. The main implication is that physicians’ incentive to over utilize medical services for their own benefits is significant and severe in China.      

The welfare effect of income tax deductions for losses as insurance: Insured- versus insurer-sided adverse selection

Kaplow (1992) shows in a complete-information environment that allowing income tax deductions for losses as partial insurance is undesirable in the presence of private insurance markets. This paper elaborates on Kaplow's finding by studying two extreme types of asymmetric information structures in private insurance markets: Either the insured or insurers possess superior information. It is shown that our derived result is consistent with Kaplow's if the insured have superior information; however, Kaplow's negative conclusion with respect to the income tax deduction will be overturned if insurers have superior information instead. A policy implication from our finding is that whether or not to allow an income tax deduction for losses needs to be more refined and, specifically, it should be tailored to the “adverse selection” information structures of private insurance.     

Courts,scheduled damages,and medical malpractice insurance

We study how the functioning of the judicial system affects the availability and affordability of medical liability insurance, as proxied by the number of insurers and the premiums paid. We use two unique datasets collected in Italy from 2000 to 2010. Using the first dataset—insurance contracts for hospitals—we estimate the average treatment effect of schedules on insurers and premiums paid, conditional on judicial efficiency and proxied by different measures. Our identification rests on the partial overlap between healthcare districts and judicial districts, meaning that the caseload of a court and malpractice events at the healthcare provider level are not perfectly correlated. On average, the adoption of schedules does not produce any significant effect on insurers or on premiums paid. However, adopting schedules has a robust and significant effect on the number of insurers, but only in inefficient courts. We further investigate these findings using a second dataset comprising 17,578 malpractice insurance claims. We find evidence of a composition effect among claims that is triggered by higher levels of judicial inefficiency: As a court’s inefficiency increases, the likelihood for a case to not be decided on the merits decreases and the levels of reserve and recovery per claim decrease.     

Two separated effects of employer-provided health insurance on job mobility

We estimate the effect of employer-provided health insurance (EPHI) on job mobility via a dynamic model of joint employment and health insurance decision in the presence of uncertainty about wage rate and health status transitions. The model is based on a Markov decision process in which a hedonic wage approach provides an economic rationale for the different choices and health insurance serves as an input to the health production process. Including health transitions in the model helps us to understand how the availability of EPHI (positive job characteristic) and holding EPHI (the wage-health insurance trade-off) enter into the individuals’ decisions. The model is estimated using the 1999–2000 Medical Expenditure Panel Survey panel 4, and the results show that the ‘pure’ effects of holding EPHI are negligible, the ‘full’ effects of EPHI are significant and the degrees of the inefficiency vary between 14% and 25% across different states.     

Corporate insurance with optimal financial contracting

Summary. This paper attemps to rationalize the use of insurance covenants in financial contracts, and shows how external financing generates a demand for insurance by risk-neutral entrepreneurs. In our model, the entrepreneur needs external financing for a risky project that can be affected by an accident during its realization. Accident losses and final returns are private information to the firm, but they can be evaluated by two costly auditing technologies. We derive the optimal financial contract: it is a bundle of a standard debt contract and an insurance contract with franchise, trading off bankruptcy costs vs auditing costs. We then analyze how this optimal contract can be achieved by decentralized trading on competitive markets when insurance and credit activities are exogenously separated. With additive risks, the insurance contract involves full coverage above a straight deductible. We interpret this result by showing how our results imply induced risk aversion for risk-neutral firms. Received: December 14, 1998; revised version: August 11, 1999     

Community rating and the market for private non-group health insurance

Prior research on adverse selection in health insurance markets has found only mixed evidence for adverse selection in group settings. We examine the impact of state community rating regulations enacted in the 1990s, which greatly limited insurers' ability to risk rate premiums, to determine if adverse selection is more evident in non-group insurance markets. Using data from large, national surveys we find evidence of a shift to a less healthy pool of non-group enrollees as a consequence of community rating. Community rating made healthy people 20 to 60% less likely to be insured by non-group health insurance; in addition, we found evidence that young and healthy people were 20 to 30% more likely to be uninsured as a result of community rating. We also find evidence that individuals in poor health were 35 to 50% more likely to be insured in the non-group market, but only limited evidence suggesting that persons in poor health were less likely to be uninsured. Our results are further supported by findings suggesting that non-group enrollees were sicker as a result of the community rating laws. Lastly, we find evidence suggesting that HMO penetration in the non-group market increased disproportionately in states that implemented community rating relative to states that did not.     

Public provision of health insurance and aggregate saving in an overlapping generations model with endogenous health risk: The South Korean case

This paper examines the effect of expanding public health insurance in South Korea on medical expenditures and aggregate saving using an overlapping generations model with endogenous health risk. South Korea had a substantial underinsured population, which is aging rapidly. Higher public health insurance benefits reduce individual medical expenditure and health risks but lead to a modest decline in individual and aggregate saving. Even after the expansion, the medical care coverage remains incomplete, and the elderly face a substantial risk of out-of-pocket medical expenditures.     

城镇低保户医疗服务利用和医疗保障制度设计对就医行为的影响——基于兰州、西宁和白银城镇家庭调查数据的分析

解决低保户看病难问题事关社会底线公平。文章基于2005年三个西北城市的17 690个样本对低保户就医问题展开实证研究,分析结果表明,由于中国医疗机构扭曲的激励机制和偏重住院报销的给付结构,低保户和非低保户两个群体都倾向于自己购药处理日常病患,而减少了门诊利用,经常面临生存危机的低保户由此拖延病情直至病情严重;个人账户既不能横向分散不同人群的疾病风险,也不能纵向分散个人在生命周期不同阶段的疾病风险;职工基本医疗保险能够显著增加中青年低保户对住院服务的利用,但对老龄低保户没有效果。     

Investigating household choice for health and life insurance

The objective of this article is to investigate the joint determination of household choice for health and life insurance. Using the 2008–2009 Consumer Expenditure Survey data, we model household choice for health and life insurance assuming households consider purchasing them to manage financial risks in their life, after accounting for household characteristics, insurance characteristics, health status, and disability status. The model allows assessing the impact of health insurance choice on the choice of life insurance and the correlation between these two choices. The result suggests that health insurance choice positively affects the choice of life insurance and these two choices are positively correlated indicating complementary nature of these insurances in the basket of households’ risk minimising goods.     

Medical insurance with rank-dependent utility

Summary. A well-known result in the medical insurance literature is that zero co-insurance is never second-best for insurance contracts subject to moral hazard. We replace the usual expected utility assumption with a version of the rank-dependent utility (RDU) model that has greater experimental support. When consumers exhibit such preferences, we show that zero co-insurance may in fact be optimal, especially for low-risk consumers. Indeed, it is even possible that the first-best and second-best contracts are identical. In this case, there is no “market failure”, despite the informational asymmetry. We argue that these RDU results are in better accord with the empirical evidence from US health insurance markets. Received: February 26, 2001; revised version: October 4, 2002 RID="*" ID="*"The authors would particularly like to thank Simon Grant, John Quiggin, Peter Wakker and an anonymous referee for valuable comments and suggestions on earlier drafts. The paper has also benefitted from the input of seminar audiences at The Australian National University, University of Auckland, University of Melbourne and University of Sydney. Ryan also gratefully acknowledges the financial support of the ARC, through Grant number A000000055. Correspondence to:R. Vaithianathan     

Economic efficiency and social insurance reforms in China

This study discusses efficiency issues related to social insurance provisions and their implications for the newly established three-pillar pension system and three-tier health insurance system in China. It shows that these new systems can be improved substantially through some restructuring to reduce efficiency losses. The discussion of efficiency consequences focuses on correction for market failure and alternative mechanisms for financing and providing social insurance benefits. Alternative methods for financing the transition are also discussed.     

Taxation,insurance, and precautionary labor

We examine optimal taxation and social insurance with adverse selection in competitive insurance markets. In a previous literature, it has been shown that, with perfect insurance markets, social insurance improves welfare since it is able to redistribute without creating distortions. This result has been taken as robust to the introduction of adverse selection as this would only provide additional justifications for social insurance. We show, however, that adverse selection can weaken the case for social insurance compared to a situation with perfect markets. Whenever social insurance mitigates private underinsurance, it also causes welfare-reducing effects by decreasing precautionary labor supply and hence tax revenue. In addition, adverse selection may reduce the redistributive potential of social insurance. We illustrate our general results using different equilibrium concepts for the insurance market. Notably, we derive conditions under which a complete renunciation of social insurance is optimal and the government only relies on income taxation to achieve its redistributive objectives.     

Health insurance and lifestyles

This article contributes to the discussion surrounding the existence of ex ante moral hazard and propitious selection in a voluntary private health insurance scenario. Moreover, it provides an estimation of the determinants of lifestyle choices and of private health insurance demand. A multivariate probit is estimated for health insurance demand and lifestyle decisions to take into account the potential endogeneity of these decisions. The results indicate that there is evidence of ex ante moral hazard in deciding to do sports and eating healthy snacks. Hence, no propitious selection has been found for these decisions. Another relevant result shows that there is no individual heterogeneity for the lifestyle choices, except for smoking, and private health insurance choice. Evidence from the results also supports the idea that there are nonobservable variables playing a role in the lifestyle decisions. These results provide some directions for policymakers, such as the promotion of precautionary behaviours and the use of implicit lifestyle drivers to promote healthy choices by people.     

我国健康保险有效需求的实证分析

有效保险需求是在当前特定时期内,在一定保险价格、一定购买力条件下现实的保险需求,是保险公司真正面对的业务来源。本文使用最近几年健康保险保费收入、城镇居民可支配收入、城镇基本医疗保险基金总收入及居民医疗保健支出等数据,通过建立回归模型对健康保险有效需求进行分析。结果显示：居民购买力和医疗费用的增长对我国健康保险的有效需求有显著影响,社会保险并未对商业健康保险产生替代作用,相反与健康保险保费收入同向增长。     

Health insurance: Medical treatment vs disability payment

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.