Health insurance: tradeoffs revisited.
In two recent papers, [Journal of Health Economics 18(2), 141-152, Journal of Health Economics 18(6), 811-824] Nyman raised some questions about the welfare calculations and conclusions in our earlier paper [Manning and Marquis, Health insurance: the tradeoff between risk pooling and moral hazard, Vol. 15, 1996]. This note discusses the erroneous criticisms in his papers. First, although, we estimated a Marshallian demand curve, our calculations are based on compensating variations that incorporate the gains from risk pooling. Second, our estimates of second best insurance plans indicate that some cost sharing is optimal, in contradiction to his assertion that our results raise questions about the desirability of insurance coverage. The comment also deals with other issues raised by Nyman.
Department of Health Studies MC 2007, 5841 South Maryland Avenue, University of Chicago, Chicago, IL, USA. w-manning@uchicago.edu
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D017047:Cost Sharing; D005249:Fees and Charges; D005102:Health Expenditures / Q000706:statistics & numerical data*; D006301:Health Services Needs and Demand / Q000191:economics*; D006302:Health Services Research / Q000379:methods; D006801:Humans; D015271:Insurance Pools / Q000191:economics*; D017057:Medically Uninsured; D012306:Risk