[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/28982.html
   My bibliography  Save this paper

The design of insurance coverage for medical products under imperfect competition

Author

Listed:
  • Bardey, David
  • Cremer, Helmuth
  • Lozachmeur, Jean-Marie
Abstract
This paper studies the design of health insurance with ex post moral hazard, when there is imperfect competition in the market for the medical product. Various scenarios, such as monopoly pricing, price negotiation or horizontal differentiation are considered. The insurance contract specifies two types of copayments: an ad valorem coinsurance rate and a specific (per unit) copayment. By combining both copayment rates in an adequate way the insurer can effectively control the producer price, which is then set so that the producer’s revenue just covers fixed costs. Consequently, a suitable regulation of the copayment instruments leads to the same reimbursement rule of individual expenditures as under perfect competition for medical products. Additional rationing of coverage because of imperfect competition as advocated by Feldstein (1973) is thus not necessary. Interestingly the optimal policy closely resembles a reference price mechanism in which copayment rates are low (possibly negative) and coinsurance rates are high.

Suggested Citation

  • Bardey, David & Cremer, Helmuth & Lozachmeur, Jean-Marie, 2015. "The design of insurance coverage for medical products under imperfect competition," TSE Working Papers 15-553, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:28982
    as

    Download full text from publisher

    File URL: http://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2015/wp_tse_553.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
    2. Bardey, David & Jullien, Bruno & Lozachmeur, Jean-Marie, 2016. "Health insurance and diversity of treatment," Journal of Health Economics, Elsevier, vol. 47(C), pages 50-63.
    3. González, Paula & Macho-Stadler, Inés & Pérez-Castrillo, David, 2016. "Private versus social incentives for pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 50(C), pages 286-297.
    4. Vaithianathan, Rhema, 2006. "Health insurance and imperfect competition in the health care market," Journal of Health Economics, Elsevier, vol. 25(6), pages 1193-1202, November.
    5. Diamond, P. A., 1975. "A many-person Ramsey tax rule," Journal of Public Economics, Elsevier, vol. 4(4), pages 335-342, November.
    6. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2013. "What Good Is Wealth Without Health? The Effect Of Health On The Marginal Utility Of Consumption," Journal of the European Economic Association, European Economic Association, vol. 11, pages 221-258, January.
    7. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, September.
    8. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.
    9. Martin Gaynor & Deborah Haas-Wilson & William B. Vogt, 2000. "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second-Best in Health Care Markets," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 992-1005, October.
    10. Bardey, D. & Bommier, A. & Jullien, B., 2010. "Retail price regulation and innovation: Reference pricing in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 29(2), pages 303-316, March.
    11. Blomqvist, Ake, 1997. "Optimal non-linear health insurance," Journal of Health Economics, Elsevier, vol. 16(3), pages 303-321, June.
    12. Lakdawalla, Darius & Sood, Neeraj, 2013. "Health insurance as a two-part pricing contract," Journal of Public Economics, Elsevier, vol. 102(C), pages 1-12.
    13. Besley, Timothy J., 1988. "Optimal reimbursement health insurance and the theory of Ramsey taxation," Journal of Health Economics, Elsevier, vol. 7(4), pages 321-336, December.
    14. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
    15. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-280, Part I, M.
    16. Feldman, Roger & Dowd, Bryan, 1991. "A New Estimate of the Welfare Loss of Excess Health Insurance," American Economic Review, American Economic Association, vol. 81(1), pages 297-301, March.
    17. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-552, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bardey, David & Harker, Arturo & Zuluaga, Daniela, 2021. "Price cap regulation in the Colombian pharmaceutical market: An impact evaluation," TSE Working Papers 21-1195, Toulouse School of Economics (TSE).
    2. Catalina Gutiérrez S. & Nicolás Gómez, 2018. "El sistema de salud colombiano en las próximas décadas: cómo avanzar hacia la sostenibilidad y la calidad en la atención," Cuadernos de Fedesarrollo 16251, Fedesarrollo.
    3. Cremer, Helmuth & Lozachmeur, Jean-Marie, 2022. "Coinsurance vs. co-payments: Reimbursement rules for a monopolistic medical product with competitive health insurers," Journal of Health Economics, Elsevier, vol. 84(C).
    4. Mak, Henry Y., 2018. "Managing imperfect competition by pay for performance and reference pricing," Journal of Health Economics, Elsevier, vol. 57(C), pages 131-146.
    5. Bardey, David & Li, Sanxi & Wu, Yaping, 2015. "Health Care Insurance Payment Policy when the Physician and Patient May Collude," TSE Working Papers 15-572, Toulouse School of Economics (TSE).
    6. Gilad Sorek & Randolph T. Beard, 2016. "Regulating from the Demand Side: Public Health Insurance with Monopolistically Competitive Providers and Optional Spot Sales," Auburn Economics Working Paper Series auwp2016-06, Department of Economics, Auburn University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cremer, Helmuth & Lozachmeur, Jean-Marie, 2022. "Coinsurance vs. co-payments: Reimbursement rules for a monopolistic medical product with competitive health insurers," Journal of Health Economics, Elsevier, vol. 84(C).
    2. Wigger, Berthold U. & Anlauf, Markus, 2002. "Moral Hazard, Market Power, and Second Best Health Insurance," CSLE Discussion Paper Series 2002-06, Saarland University, CSLE - Center for the Study of Law and Economics.
    3. Pierre Martinon & Pierre Picard & Anasuya Raj, 2017. "On the Design of Optimal Health Insurance Contracts under Ex Post Moral Hazard," Working Papers hal-01348551, HAL.
    4. Pierre Martinon & Pierre Picard & Anasuya Raj, 2018. "On the design of optimal health insurance contracts under ex post moral hazard," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(2), pages 137-185, September.
    5. Ellis, Randall P. & Jiang, Shenyi & Manning, Willard G., 2015. "Optimal health insurance for multiple goods and time periods," Journal of Health Economics, Elsevier, vol. 41(C), pages 89-106.
    6. Anlauf, Markus & Wigger, Berthold U., 1999. "Health insurance and consumer welfare : The case of monopolistic drug markets," Discussion Papers 565, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    7. Pierre Picard, 2016. "A Note on Health Insurance under Ex Post Moral Hazard," Risks, MDPI, vol. 4(4), pages 1-9, October.
    8. Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2022. "Paying for pharmaceuticals: uniform pricing versus two-part tariffs," Journal of Health Economics, Elsevier, vol. 83(C).
    9. Nell, Martin & Richter, Andreas & Schiller, Jörg, 2009. "When prices hardly matter: Incomplete insurance contracts and markets for repair goods," European Economic Review, Elsevier, vol. 53(3), pages 343-354, April.
    10. Jung, Juergen & Tran, Chung, 2022. "Social health insurance: A quantitative exploration," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    11. Westerhout, Ed & Folmer, Kees, 2018. "The Effects of Capping Co-Insurance Payments," Other publications TiSEM 828746fb-4fb0-465b-bdff-3, Tilburg University, School of Economics and Management.
    12. Westerhout, Ed & Folmer, Kees, 2018. "The Effects of Capping Co-Insurance Payments," Discussion Paper 2018-050, Tilburg University, Center for Economic Research.
    13. Richard Dusansky & Çağatay Koç, 2010. "Implications of the Interaction Between Insurance Choice and Medical Care Demand," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 129-144, March.
    14. Run Liang & Hao Wang, 2017. "Health insurance, market power, and social welfare," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(4), pages 427-442, December.
    15. Cockx, Bart & Brasseur, Carine, 2003. "The demand for physician services: Evidence from a natural experiment," Journal of Health Economics, Elsevier, vol. 22(6), pages 881-913, November.
    16. Sidorenko, Alexandra, 2001. "Stochastic Model of Demand for Medical Care with Endogenous Labour Supply and Health Insurance," Departmental Working Papers 2001-08, The Australian National University, Arndt-Corden Department of Economics.
    17. Richard Dusansky & Çağatay Koç, 2016. "Individual Welfare When Consumers Can Shop For Health Insurance," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1283-1290, April.
    18. Boone, Jan, 2015. "Basic versus supplementary health insurance: Moral hazard and adverse selection," Journal of Public Economics, Elsevier, vol. 128(C), pages 50-58.
    19. Blomqvist, Ake, 1997. "Optimal non-linear health insurance," Journal of Health Economics, Elsevier, vol. 16(3), pages 303-321, June.
    20. Ellis, Randall P. & Manning, Willard G., 2007. "Optimal health insurance for prevention and treatment," Journal of Health Economics, Elsevier, vol. 26(6), pages 1128-1150, December.

    More about this item

    Keywords

    ex post moral hazard; health insurance contracts; copayments; imperfect competition;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:28982. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.