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Design Health Insurance for Overtreatment

12 Pages Posted: 21 May 2017  

Wei HU

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: May 18, 2017

Abstract

This paper proposes an insurance solution for the overtreatment problem. We show that a patient can be encouraged to seek a second opinion more often if the health insurance covers the income risk associated with this choice. The resulting insurance policy features a coinsurance rate that is contingent on the patient’s pursuit of a second opinion and on the kind of treatment she finally takes. In a perfectly competitive insurance market, this policy induces the patient to seek a second opinion whenever it is socially efficient. This reduces the amount of overtreatment and the expected healthcare expenditure.

Keywords: Health Care Expenditure, Overtreatment, Health Insurance

JEL Classification: I13

Suggested Citation

HU, Wei, Design Health Insurance for Overtreatment (May 18, 2017). Available at SSRN: https://ssrn.com/abstract=2970922 or http://dx.doi.org/10.2139/ssrn.2970922

Wei HU (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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