Countries that seek to provide universal health coverage deal with considerable publicly funded expenses. This article discusses if a private health insurance subsidy policy can reduce the expenses covered by the public system. A theoretical model is developed in which individuals are characterized by two dimensions: inherited risk of illness and preferences for prevention activities. It is shown that when beneficiaries of a voluntary plan have lower risk, i.e. advantageous selection scenario, a subsidy raises heath expenses if articulation between coverage is complementary. On the contrary, in adverse selection scenarios a subsidy reduces expenditure if articulation is supplementary. Intermediate scenarios are also considered where articulations between coverages have both complementary and supplementary components, which is apparently the case for the Colombian health system. Calibrated numerical simulations are provided using the Colombian system data. The calibration strategy employed reveals that selection is adverse in the Colombian voluntary health insurance market. Furthermore, we identify the level of subsidy and changes in articulation (towards supplementarity) that could lead to a reduction in public spending.
 

The design of insurance coverage for medical products under imperfect competition
 

This paper studies the design of health insurance with ex post moral hazard, when there is imperfect competition in the market for the medical product. Various scenarios, such as monopoly pricing, price negotiation or horizontal differentiation are considered. The insurance contract specifies two types of copayments: an ad valorem coinsurance rate and a specific (per unit) copayment. By combining both copayment rates in an adequate way the insurer can effectively control the producer price, which is then set so that the producer´s revenue just covers …fixed costs. Consequently, a suitable regulation of the copayment instruments leads to the same reimbursement rule of individual expenditures as under perfect competition for medical products. Additional rationing of coverage because of imperfect competition as advocated by Feldstein (1973) is thus not necessary. Interestingly the optimal policy closely resembles a reference price mechanism in which copayment rates are low (possibly negative) and coinsurance rates are high.

 

Adverse Selection vs Discrimination Risk with Genetic Testing. An Experimental Approach

 

We develop a theoretical analysis of two widely used regulations of genetic tests, disclosure duty and consent law, and we run several experiments in order to shed light on both the take-up rate of genetic testing and on the comparison of policy-holders’ welfare under the two regulations. Disclosure Duty forces individuals to reveal their test results to their insurers, exposing them to the risk of having to pay a large premium in case they are discovered to have a high probability of developing a disease (a discrimination risk). Differently, Consent Law allows them to hide this detrimental information, creating asymmetric information and adverse selection. We obtain that the take-up rate of the genetic test is low under Disclosure Duty, larger and increasing with adverse selection under Consent Law. Also, the fraction of individuals who are prefer Disclosure Duty to Consent Law increases with the amount of adverse selection under the latter. These results are obtained for exogenous values of adverse selection under Consent Law, and the repeated interactions experiment devised has not resulted in convergence towards an equilibrium level of adverse selection.

Este trabajo revisa la literatura que trata del funcionamiento de la competencia en el sector de la salud cuando este está organizado alrededor de una managed care competition. Se abordan en una primera parte los problemas de asimetría de información que caracterizan los mercados de aseguramiento en salud y aquellos en los cuales intervienen los prestadores de salud. La segunda parte se focaliza en los aspectos de organización industrial del sector salud, como los de competencia monopolística para el mercado de los médicos, el oligopolio bilateral que forman aseguradores y prestadores y los posibles aspectos de mercados de dos lados. Este documento concluye con algunas recomendaciones de política para el sistema de salud colombiano. En particular se contempla la posibilidad de introducir, al margen, una competencia en primas entre EPS para que la competencia entre ellas sea más efectiva. En el contexto actual, el canal de transmisión de las ganancias de eficiencia que generan las EPS está obstruido. Por ende, la competencia en primas permitiría una mejor transmisión de estas eficiencias.

We determine the optimal health policy mix when the average utility of patients increases with the supply of drugs available in a therapeutic class. Health risk coverage rely on two instruments, copayment and reference pricing, that affect the supported risk composed by health expenses and diversity of treatment. For a fixed supply of drugs, the reference pricing policy aims at minimizing expenses in which case, the equilibrium price of drugs is independent of the copayment rate. However, with endogenous supply of drugs, diversity of treatment may susbtitute for insurance so that the reference pricing may depart from maximal cost-containement to promote entry. We then analyse the determinents of the optimal policy. While an increase in risk aversion or in the side effect loss increases diversity and decreases the copayment rate, an increase in entry cost both decreases diversity and the copayment rate.

We study the effect of UI benefits in a typical developing country where the informal sector is sizeable and persistent. In a partial equilibrium environment we characterize the stationary equilibrium of an economy where policyholders may be employed in the formal sector, short-run unemployed receiving UI benefits and long-run unemployed without UI benefits. We perform comparative static exercises to understand how UI benefits affect unemployed workers’effort to secure a formal job, their labor supply in the informal sector and leisure time. Our model reveals that an increase in UI benefits generates two opposing effects for the short-run unemployed. First, since search efforts cannot be monitored it generates moral hazard behaviours that lower effort. Second, it generates an income effect as it reduces the marginal cost of searching for a formal job and increases effort. The overall effect is ambiguous and depends on the relative strength of these two effects. Additionally, we show that an increase in UI benefits increases the efforts of long-run unemployed workers. Using data from Brazil to calibrate the parameters of the model we provide a simple simulation exercise which suggests that the income effect pointed out is not necessarily of second-order importance in comparison with moral hazard strength: An increase in UI benefits may increase unemployed workers efforts to secure a job in the formal sector, instead of increasing informal-sector work. This result softens the widespread opinion that the presence of dual labor markets is an obstacle to providing UI in developing countries.