Design Health Insurance for Overtreatment
12 Pages Posted: 21 May 2017
Date Written: May 18, 2017
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: Suggested Citation