title: Shifted deductibles for high risks: more effective in reducing moral hazard than traditional deductibles.
abstract: In health insurance, a traditional deductible (i.e. with a deductible range [0,d]) is in theory not effective in reducing moral hazard for individuals who know (ex-ante) that their expenditures will exceed the deductible amount d, e.g. those with a chronic disease. To increase the effectiveness, this paper proposes to shift the deductible range to [s(i),s(i)+d], with starting point s(i) depending on relevant risk characteristics of individual i. In an empirical illustration we assume the optimal shift to be such that the variance in out-of-pocket expenditures is maximized. Results indicate that for the 10-percent highest risks in our data the optimal starting point of a euro1000-deductible is to be found (far) beyond euro1200, which corresponds with a deductible range of [1200,2200] or further. We conclude that, compared to traditional deductibles, shifted deductibles with a risk-adjusted starting point lower out-of-pocket expenditures and may further reduce moral hazard.
authors.affiliation: Institute of Health Policy and Management, Erasmus Medical Centre/Erasmus University, Rotterdam, The Netherlands. vankleef@bmg.eur.nl
authors.forename: R C
authors.initials: RC
authors.lastname: van Kleef
authors.forename: W P M M
authors.initials: WP
authors.lastname: van de Ven
authors.forename: R C J A
authors.initials: RC
authors.lastname: van Vliet
mesh_terms: D000293:Adolescent; D000328:Adult; D000368:Aged; D003669:Deductibles and Coinsurance / Q000941:ethics*; D005260:Female; D005102:Health Expenditures; D006304:Health Status; D006801:Humans; D007348:Insurance, Health / Q000191:economics*; D008297:Male; D008875:Middle Aged; D017059:Models, Econometric; D020379:Risk Adjustment / Q000191:economics*; D055815:Young Adult