Forward-Looking Behavior in Health Insurance

Abstract

We investigate whether individuals adjust their health care utilization in anticipation of forthcoming price changes. Leveraging an exogenous increase in cost-sharing in the Swiss health care system at the age of 18, we estimate the impact of future price changes on current health care demand. Results indicate that individuals expecting higher future prices augment current outpatient health care spending by approximately CHF 40 (or 5%). This behavior is confined to low-cost male individuals, who likely have the strongest incentives to engage in anticipatory spending. We find no evidence for forward-looking behavior in the inpatient sector. Our study underscores the significance of forward-looking behavior in health care demand analysis, health insurance design, and the potential welfare implications of patient cost-sharing.

Keywords: forward-looking behavior, health insurance, healthcare demand, dynamic incentives