DP17057 A structural microsimulation model for demand-side cost-sharing in healthcare

Author(s): Jan Boone, Minke Remmerswaal
Publication Date: February 2022
Keyword(s): Bayesian mixture model, Co-Insurance, equity, microsimulation model, moral hazard, out-of-pocket, risk, shifted deductible
JEL(s):
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17057

Demand-side cost-sharing schemes reduce moral hazard in healthcare at the expense of out-of-pocket risk. With a structural microsimulation model, we show that shifting the starting point of the deductible away from zero to 400 euros for all insured individuals, leads to an average 4% reduction in healthcare expenditure and 47% lower out-of-pocket payments for people without a chronic condition. We use administrative healthcare expenditure data for the Dutch population to analyze expenditure under different cost-sharing schemes. The model is estimated with a Bayesian mixture model to capture distributions of healthcare expenditure. This allows us to predict the effects of cost-sharing schemes that have not been used in the Netherlands.