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M6: Cost sharing and the demand for healthcare

Q: Brot-Goldberg et al. (2017) find that consumers respond to spot prices rather than the true expected end-of-year price. What are potential explanations?

Large part is unpredictable, but there is also a part that is predictable (if you are diabetes for instance). Psychological effect: what happens today is more important than what happens in the future, because we live now.

Q: What are the findings of Brot and Goldberg about cost-sharing and: the demand for health care - the demand for health care across a broad range of services - the demand for both low- and high-value care - motivate people to switch to cheaper providers? motivate people to substitute higher-cost procedures with lower cost-procedures?

Compared to full insurance cost sharing: reduces the demand for health care reduces the demand for health care across a broad range of services reduces the demand for both lowand high-value care did not motivate people to switch to cheaper providers somewhat motivated people to substitute higher-cost procedures with lower cost-cost procedures

Q: Moral hazard does not by definition impose a welfare loss. Why? (3x)

The graph could be too simplistic: implicit assumption is that the efficient allocation occurs in E0. But is this the efficient allocation? Without insurance is the optimum? The efficient allocation might be different and HI is important because: Externalities Prevention Access to medical care

10 important questions on M6: Cost sharing and the demand for healthcare

Are ex-ante and ex-post moral hazard about the price or behavioural effect?

Ex-post: price effect
Ex-ante: behavioural effect

How can moral hazard impose a welfare loss? And draw a graph with this welfare loss.

This happens when the value that consumers obtain from the additional medical care is lower than the (resource) costs of production that medical care.

The welfare loss from moral hazard might differ across types of care, why?

Moral hazard can be more substantial for one type of care than for another type of care. THere are huge differences in price elasticity of different types of care. This affects the demand for the types of care (effects of insurers).

What is ex-post moral hazard?
Relate to elasticity and demand:

Ex-post moral hazard is:
with elastic demand, insurance increases quantity demanded

What is the policy relevance of moral hazard? So why is this relation important for policy makers?

With full insurance coverage, you should acknowledge that people can change their lifestyle in a way you don’t want to see as a policy maker. You can promote the healthy lifestyle that you want to see.
Degree of insurance: What do I put in the package and what not? But, also what should be the level of coverage for medical treatment in the package? How should the cost sharing look like? 100% insurance or 90% and 10% out of pocket? Coinsurance? Etc..

The elasticity of medical spending with respect to its out-of-pocket price found in the RANDexperiment (-0.2) is not a universal constant like x, why?

RAND did a simulation and is based on assumption. The range of elasticity with varying assumptions is bigger. Don’t consider the -0.2 as a universal constant, see it as a best estimate.

Even under the assumption that the RAND-findings are completely valid, extrapolation of these findings is tricky, why?

Cultural, behavioral differences between the populations in the RAND and Oregon experiment vs. e.g. Dutch population (attitude, behavior, age (in RAND only people < 62).

Health Care system in the US is totally different from HC system in other countries. Effect/relationship between demand for health care and health care spending is also influenced by how the health plan is designed

Brot-Goldberg et al. (2017) find that consumers respond to spot prices rather than the true expected end-of-year price. What are potential explanations?

Large part is unpredictable, but there is also a part that is predictable (if you are diabetes for instance). Psychological effect: what happens today is more important than what happens in the future, because we live now.

What are the findings of Brot and Goldberg about cost-sharing and:
the demand for health care
- the demand for health care across a broad range of services
- the demand for both low- and high-value care
- motivate people to switch to cheaper providers?
motivate people to substitute higher-cost procedures with lower cost-procedures?

Compared to full insurance cost sharing:

reduces the demand for health care
reduces the demand for health care across a broad range of services
reduces the demand for both lowand high-value care
did not motivate people to switch to cheaper providers
somewhat motivated people to substitute higher-cost procedures with lower cost-cost procedures

Moral hazard does not by definition impose a welfare loss. Why? (3x)

The graph could be too simplistic: implicit assumption is that the efficient allocation occurs in E0. But is this the efficient allocation? Without insurance is the optimum? The efficient allocation might be different and HI is important because:

Externalities
Prevention
Access to medical care

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Economics and financing of health care (flashcards)

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M6: Cost sharing and the demand for healthcare

10 important questions on M6: Cost sharing and the demand for healthcare

Are ex-ante and ex-post moral hazard about the price or behavioural effect?

How can moral hazard impose a welfare loss? And draw a graph with this welfare loss.

The welfare loss from moral hazard might differ across types of care, why?

What is ex-post moral hazard? Relate to elasticity and demand:

What is the policy relevance of moral hazard? So why is this relation important for policy makers?

The elasticity of medical spending with respect to its out-of-pocket price found in the RANDexperiment (-0.2) is not a universal constant like x, why?

Even under the assumption that the RAND-findings are completely valid, extrapolation of these findings is tricky, why?

Brot-Goldberg et al. (2017) find that consumers respond to spot prices rather than the true expected end-of-year price. What are potential explanations?

Moral hazard does not by definition impose a welfare loss. Why? (3x)

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What is ex-post moral hazard?
Relate to elasticity and demand:

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