HOW HEALTH INSURANCE AFFECTS HEALTH CARE DEMAND—A STRUCTURAL ANALYSIS OF BEHAVIORAL MORAL HAZARD AND ADVERSE SELECTION

Individuals with health insurance use more health care. One reason is that health care is cheaper for the insured. Additionally, having insurance can encourage unhealthy behavior via moral hazard. Previous work studying the effect of health insurance on medical utilization has mostly ignored behavioral changes due to having health insurance, and how that in turn affects medical utilization. This paper investigates the structural causal relationships among health insurance status, health behavior, and medical utilization theoretically and empirically, and separates price effects from behavioral moral hazard effects. Also distinguished are the extensive versus intensive margins of insurance effects on behavior. (JEL C51, I12, D12)     

INDIVIDUAL WELFARE WHEN CONSUMERS CAN SHOP FOR HEALTH INSURANCE

The statewide system of health insurance exchanges established by the Affordable Care Act (ACA) of 2010 will allow millions of U.S. citizens to change their health care policies more easily than they can switch automobile or homeowner insurance coverages, because deniability based on prior claim history is illegal. Focusing on this consumer endogeneity of health insurance policy choice, we examine the individual moral hazard welfare implications of a reduction in the price of medical care, which is a potential consequence of the ACA. We show that endogenous policy choice plays a key role in determining the welfare outcome. While moral hazard welfare improvement is not precluded, a distinctly possible outcome is that the consumer revises his/her choice of insurance policy so as to retain some portion of the reduction in expenditure risk caused by the medical care price decrease. In this event, moral hazard welfare loss is higher than it was before the price decrease, although the increased loss is tempered by the endogenous contract choice effect. This result resuscitates an old conventional wisdom. (JEL I11, I13, I30)     

IS THERE ADVERSE SELECTION IN LIFE INSURANCE MARKETS?

Adverse selection theory predicts people with a high risk of death are more likely to own life insurance. Using a unique data set merging administrative and survey records, we test this theory and find the opposite: people with high death risk are less likely to own life insurance. We postulate advantageous selection and price discrimination swamp adverse selection in individual life insurance markets. To determine which effect is more powerful, we analyze group life insurance markets, where insurance companies cannot price discriminate as well as in individual markets. Our data suggest that price discrimination has a stronger effect than advantageous selection. (JEL D8, G1, I1)     

DO SUPPLY‐SIDE FORCES EXPLAIN GEOGRAPHIC VARIATION IN HEALTH CARE USE?

Regional variation in health care utilization has been well‐documented, yet uncertainty persists about whether this variation is primarily the result of supply‐side or demand‐side forces. We provide new evidence on this issue by examining changes in health care use for the near‐elderly as they transition from being uninsured into Medicare. Results support a causal, supply‐side explanation of regional variation. Estimates indicate that gaining Medicare coverage in above‐median spending regions increases the probability of at least one hospital visit by 40% and the probability of having more than five doctor visits by 26% relative to similar individuals in below‐median spending regions. (JEL D43, H42, H51, I1, I11, I13)     

Are There Differing Patterns of Health Care Access and Utilization Among Male Sexual Minorities in the United States?

Disparities in health care access and utilization among male sexual minorities in the United States were explored using data from the National Survey of Family Growth (N = 8,846). Bisexual men had a small disadvantage in health insurance coverage but no differences were found in health insurance or consistency of coverage between gay and heterosexual men. Gay men were more likely to have a usual place of care, but were not more likely to utilize services. The current study provides inconclusive evidence for systematic disparities in health care access and utilization among gay and bisexual men in the United States.     

HEALTH CARE, INSURANCE, AND THE CONTRACT CHOICE EFFECT

This article explores the interdependence between the individual consumer's demand for medical care and choice of health insurance coverage, with emphasis on its implications for demand behavior and empirical analysis. We show that an increase in the price of medical care has two effects on demand, the usual response of reduced quantity demanded and a health insurance contract choice effect resulting from the consumer's incentive to change insurance plan. The contract choice effect, widely neglected in studies of medical care demand, alters both the quantitative and qualitative predictive properties of the consumer's demand for medical services. (JEL D11, D81, I11 )     

HETEROGENEITY IN STATE‐DEPENDENT UTILITY: EVIDENCE FROM STRATEGIC SURVEYS

A standard result of life‐cycle models under uncertainty is that optimizing individuals equate the expected marginal utility of consumption across states of the world if insurance is available at actuarially fair rates. A small empirical literature has suggested that the marginal utility of consumption is lower in less healthy states. We use a novel survey‐based measure to document significant heterogeneity in health‐state dependence across individuals largely orthogonal to standard controls. We further show that individuals value unhealthy states of the world more when facing work‐limiting disabilities than when facing disabilities requiring long‐term care, and when facing physical rather than mental disabilities. (JEL D12, I10)     

DO HMO PLANS REDUCE HEALTH CARE EXPENDITURE IN THE PRIVATE SECTOR?

The cost containment performance of health maintenance organization (HMO) plans relative to non‐HMOs is examined using data from the 2000 Medical Expenditure Panel Survey. When various compounding factors are controlled for, among the privately insured, nonelderly population, HMO enrollment is found to contain neither total health care spending nor total insurance payment, though it reduces total out‐of‐pocket expenditure. We further find that this result is not attributed to selectivity in health plan choice due to health risk. The favorable cost sharing for enrollees and the distinct reimbursement schemes in HMO plans seem to account for no significant overall cost saving. (JEL I11, C25)     

THE IMPACT OF A PUBLIC OPTION IN THE U.S. HEALTH INSURANCE MARKET

We develop a game‐theoretical framework to examine the implications of the introduction of a nonprofit “public option” in the U.S. health insurance market. In this model, heterogeneous consumers have to choose between two competing insurance plans. One plan is offered by a profit‐maximizing private insurer; the other by social‐welfare‐maximizing public option. In equilibrium, the distinct objectives of the two insurers induce adverse selection in consumer choice: the public option covers the less healthy consumers, yielding the more profitable segment of market to the private insurer. However, our empirical results suggest that both insurers will capture significant parts of the health insurance market. (JEL I11, L10, L21, L32)     

The Cost of Instability: The Effects of Family,Work, and Welfare Change on Low‐Income Women’s Health Insurance Status

The number of uninsured Americans has risen substantially over the last decade. Despite the availability of Medicaid, low‐income women are at particularly elevated risk of having no or inadequate health insurance. How does continuity of work, family, and welfare affect low‐income women’s health insurance status? A multinomial logistic regression analysis of 1,662 low‐income women from the Welfare, Children, and Families: A Three‐City Study provides evidence of the consequences of life changes on access to health insurance from 1999–2005. The results show that compared to those with stable welfare, work, and family attachments, new full‐time employment actually increases low‐income women’s risk of being uninsured as does being underemployed, on welfare, or single for extended periods of time. These findings illustrate how health‐care reform must adequately address the complexity of low‐income women’s lives—including the ways labor market, state, and family factors interact to create barriers to health insurance—in order to improve access to care under the current U.S. health insurance model.     

Mexican immigration and health care: a political economy perspective.

This paper examines the case of Mexican immigrants in the United States and their access to medical services within a political economy of health framework. Such an approach stresses that the provision of health care is independent of health factors per se and that access to health care is not equally distributed throughout a population. The first section reviews the three major concepts influencing medical anthropologists working within a political economy framework: the social origins of illness; the allocation of health resources; and fieldwork in Third World countries. The analysis then focuses upon the reasons for limiting immigrants' access to health care, followed by an examination of the socioeconomic characteristics of Mexican immigrants, including an undocumented immigration status, which limit their access to health care. Finally, the consequences of limited access to health services are suggested, including a low utilization of preventive health services resulting from the high cost of care combined with the immigrants' generally low income, lack of medical insurance and fear of using U.S. health services.     

Healthcare Reforms and the Creation of Ex‐/Included Categories of Patients — “Irregular Migrants” and the “Undesirable” in the French Healthcare System

This article reconstructs the socio‐historical processes that have led to the formal inclusion and marginalization of “irregular migrants” in the French public health insurance system and the parallel legal production of exclusion of a share of this group. It interrogates the binary inclusion/exclusion in the field of healthcare linking it to the logic of sovereignty and governmentality in a stratified society. It shows how these processes have led to unequal health practices and increased obstacles to accessing health insurance and healthcare providers, and, consequently, has resulted in the exclusion of a share of this group from the regular healthcare system. These two levels of discrimination are illustrated using empirical research on departments in French public hospitals that have been designed to enable access to care for individuals without insurance (Permanence d'accès aux soins de santé, or PASS: health care access units).     

DESIGNED TO FAIL: THE MEDICARE AUCTION FOR DURABLE MEDICAL EQUIPMENT

We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high‐cost firms potentially displace low‐cost firms as winners. Further, the auction may leave demand unfulfilled as some winners refuse to supply because the price is set below their cost. We also introduce a model of nonbinding bids that establishes the rationality of a lowball bid strategy employed by many bidders in the actual Medicare auctions and recently replicated in Caltech experiments. We contrast the median‐price auction with the standard clearing‐price auction where each firm bids true costs as a dominant strategy, resulting in competitive equilibrium prices and full efficiency. (JEL D44, I11, H57)     

OPTIMAL PRICE OF ENTRY INTO A COMPETITION

A continuum of contestants are choosing whether to enter a competition. Each contestant has a type, and of those who enter, the ones with highest types receive prizes. A profit‐maximizing firm controls entry, and charges a price for it. I show that an increase in the value of each prize leads the firm to raise the price while keeping the intensity of entry fixed. Conversely, when the mass of prizes increases, the firm initially keeps the price constant while allowing entry to increase; and later—raises the price. (JEL C72, D82, D83)     

PRICE ADJUSTMENT POLICIES AND FIRM SIZE

A number of U.S. State Departments of Transportation have adopted a price adjustment policy designed to limit cost fluctuations of oil‐based inputs in government procurement. Similar policies are common in defense contracting, and have been used to offset financial losses of health insurance companies in Medicare and the Affordable Care Act. We show that while all bidders submit lower bids after the policy is introduced, the extent of bid reduction diminishes with firm size. Small new firms are able to compete more frequently, promoting auction competition and efficiency. (JEL H4, H57, D44)     

TAXPAYER WILLINGNESS TO PAY FOR HEALTH INSURANCE REFORM: A CONTINGENT VALUATION ANALYSIS

A key criterion for evaluating policies to expand health insurance coverage is weighing the costs of such policies against the willingness of the public to pay for coverage expansions. We use new panel survey data from New York State to estimate residents' willingness to pay (WTP) to expand public insurance coverage. Using a nonparametric double‐bounded contingent valuation (CV) approach, we specifically ask residents about their WTP to reduce the rate of uninsurance in the state. Our results imply an aggregate lower‐bound WTP of over $2,800 per year to cover one person. We also analyze heterogeneity in WTP by sub‐group and changes in individual WTP over time between 2008 and 2010. We find that a large majority of residents are willing to pay additional taxes to reduce the number of uninsured in the state, and that average WTP remained remarkably stable despite the economic downturn and the politically polarized discussions surrounding the Affordable Care Act. Decomposing the changes in individual WTP, we find that economic factors related to the recession, including changes in income and employment status, cannot explain changes in individual WTP, whereas individual changes in political opinions about health insurance reform between 2008 and 2010 are strongly correlated with changes in WTP. (JEL H20, H42, H51, H75, I13)     

Future of Long-Term Care Financing for the Elderly in Korea

ABSTRACT

With rapid aging, change in family structure, and the increase in the labor participation of women, the demand for long-term care has been increasing in Korea. Inappropriate utilization of medical care by the elderly in health care institutions, such as social admissions, also puts a financial burden on the health insurance system. The widening gap between the need for long-term care and the capacity of welfare programs to fulfill that need, along with a rather new national pension scheme and the limited economic capacity of the elderly, calls for a new public financing mechanism to provide protection for a broader range of old people from the costs of long-term care. Many important decisions are yet to be made, although Korea is likely to introduce social insurance for long-term care rather than tax-based financing, following the tradition of social health insurance. Whether it should cover only the elderly long-term care or all types of long-term care including disability of all age groups will have a critical impact on social solidarity and the financial sustainability of the new long-term care insurance. Generosity of benefits or the level of out-of-pocket payment, the role of cash benefits, and the relation with health insurance scheme all should be taken into account in the design of a new financing scheme. Lack of care personnel and facilities is also a barrier to the implementation of public long-term care financing in Korea, and the implementation strategy needs to be carved out carefully.     

TO “VAPE” OR SMOKE? EXPERIMENTAL EVIDENCE ON ADULT SMOKERS

A growing share of the U.S. population uses e‐cigarettes but the optimal regulation of these controversial products remains an open question. We conduct a discrete choice experiment to investigate how adult tobacco cigarette smokers' demand for e‐cigarettes and tobacco cigarettes varies by four attributes: (1) whether e‐cigarettes are considered healthier than tobacco cigarettes, (2) the effectiveness of e‐cigarettes as a cessation device, (3) bans on use in public places, and (4) price. We find that adult smokers' demand for e‐cigarettes is motivated more by health concerns than by the desire to avoid smoking bans or higher prices. (JEL C35, I12, I18)     

NUDGING LIFE INSURANCE HOLDINGS IN THE WORKPLACE

Using data from a university, we analyze a policy designed to increase employer‐sponsored life insurance. The university increased basic life insurance holdings, which nudged employees with supplemental coverage to have more life insurance. In large part due to inertia, the nudge increased life insurance holdings one‐for‐one for those who could have undone it. Additionally, we find that expanding coverage options significantly increased total life insurance holdings for new hires who were not subject to inertia. These policy changes reduced uninsured vulnerabilities for two‐thirds of employees. Our findings have important policy implications for addressing widespread disparities in life insurance coverage. (JEL D31, G22, D03, J32, J33, J38, H20)