Working Paper: NBER ID: w20226
Authors: Liran Einav; Amy Finkelstein; Heidi Williams
Abstract: We present a simple graphical framework to illustrate the potential welfare gains from a “top-up” health insurance policy requiring patients to pay the incremental price for more expensive treatment options. We apply this framework to breast cancer treatments, where lumpectomy with radiation therapy is more expensive than mastectomy but generates similar average health benefits. We estimate the relative demand for lumpectomy using variation in distance to the nearest radiation facility, and estimate that the “top-up” policy increases social welfare by $700-2,500 per patient relative to two common alternatives. We briefly discuss additional tradeoffs that arise from an ex-ante perspective.
Keywords: health insurance; medical care; breast cancer; treatment choice; social welfare
JEL Codes: H44; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| distance to radiation facilities (R53) | probability of choosing lumpectomy (C25) |
| top-up policy (G52) | social welfare (I38) |
| top-up policy (G52) | lumpectomy rate (O52) |
| UK-style no top-up policy (G52) | lumpectomy rate (O52) |
| total welfare gains (D69) | no top-up UK-style policy (G52) |
| total welfare gains (D69) | full coverage US-style policy (G52) |