Working Paper: CEPR ID: DP14552
Authors: Tobias Klein; Martin Salm; Suraj Upadhyay
Abstract: We develop a new approach to quantify how patients respond to dynamic incentives in health insurance contracts with a deductible. Our approach exploits two sources of variation in a differences-in-regression-discontinuities design: deductible contracts reset at the beginning of the year, and cost-sharing limits change over the years. Using rich claims-level data from a large Dutch health insurer we find that individuals are forward-looking. Changing dynamic incentives by increasing the deductible by 100 euros leads to a reduction in healthcare spending of around 3% on the first days of the year and 6% at the annual level. We find that the response to dynamic incentives is an important part of the overall effect of cost-sharing schemes on healthcare expenditures—much more so than what the previous literature has suggested.
Keywords: patient cost-sharing; health insurance; dynamic incentives
JEL Codes: I13; H51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in deductible (G52) | decrease in healthcare spending (H51) |
| expected end-of-year price (Q31) | decrease in healthcare spending (H51) |
| dynamic incentives (O31) | decrease in healthcare spending (H51) |