American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Reducing Medical Spending of the Publicly Insured: The Case for a Cash-out Option
American Economic Journal: Economic Policy
vol. 11,
no. 3, August 2019
(pp. 390–426)
Abstract
Individuals' medical spending has both necessary and discretionary components, which are not, however, separately observable. This paper studies ways to improve upon existing public health insurance policies by using a framework where both the discretionary and necessary components of medical spending are explicitly modeled. First, using a simple theoretical framework, the paper shows that the key to reducing discretionary medical spending is to introduce a trade-off between nonmedical and medical consumption. Next, using a rich quantitative life-cycle model, the paper shows that this trade-off can be successfully implemented by introducing an option to substitute public health insurance with cash transfers.Citation
Pashchenko, Svetlana, and Ponpoje Porapakkarm. 2019. "Reducing Medical Spending of the Publicly Insured: The Case for a Cash-out Option." American Economic Journal: Economic Policy, 11 (3): 390–426. DOI: 10.1257/pol.20160433Additional Materials
JEL Classification
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- G22 Insurance; Insurance Companies; Actuarial Studies
- H51 National Government Expenditures and Health
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
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