Optimal health insurance for multiple goods and time periods.
We examine the efficiency-based arguments for second-best optimal health insurance with multiple treatment goods and multiple time periods. Correlated shocks across health care goods and over time interact with complementarity and substitutability to affect optimal cost sharing. Health care goods that are substitutes or have positively correlated demand shocks should have lower optimal patient cost sharing. Positive serial correlations of demand shocks and uncompensated losses that are positively correlated with covered health services also reduce optimal cost sharing. Our results rationalize covering pharmaceuticals and outpatient spending more fully than is implied by static, one good, or one period models.
Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, USA. Electronic address: ellisrp@bu.edu.
Randall P
RP
Ellis
Central University of Finance and Economics, Beijing, PR China. Electronic address: syijiang@gmail.com.
Shenyi
S
Jiang
Deceased, formerly at Harris School of Public Policy Studies, The University of Chicago, Chicago, IL, USA.
Willard G
WG
Manning
D017047:Cost Sharing / Q000592:standards*; D006301:Health Services Needs and Demand; D006801:Humans; D019458:Insurance Coverage; D007348:Insurance, Health; D015233:Models, Statistical; D008962:Models, Theoretical; D012309:Risk-Taking
Complements and substitutes; Dynamic models; Health insurance; Optimal cost sharing; Risk aversion