Discussion paper

DP16238 Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers

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.

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Citation

Cremer, H and J Lozachmeur (eds) (2021), “DP16238 Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers”, CEPR Press Discussion Paper No. 16238. https://cepr.org/publications/dp16238