DP16238 Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers
|Author(s):||Helmuth Cremer, Jean-Marie Lozachmeur|
|Publication Date:||June 2021|
|Keyword(s):||copayments, ex post moral hazard, health insurance competition, Imperfect Competition|
|JEL(s):||I11, I13, I18|
|Programme Areas:||Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16238|
This paper studies a market for a medical product in which there is perfect competition among health insurers, while the good is sold by a monopolist. Individuals differ in their severity of illness and there is ex post moral hazard. We consider two regimes: one in which insurers use coinsurance rates (ad valorem reimbursements) and one in which insurers use copayments (specific reimbursements). We show that the induced equilibrium with copayments involves a lower producer price and a higher level of welfare for consumers. This results provides strong support for a reference price based reimbursement policy.