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Optimal Health Insurance in the Presence of Risky Health Behaviors

Author

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  • Osman Furkan Abbasoglu

Abstract

This paper develops a model of risky health behaviors to explore the optimal cost-sharing mechanism in a single provider health insurance system in which everyone contributes the same amount. In this economy, health insurance provides coverage against controllable health outcomes, and idiosyncratic health shocks. The model is calibrated to the U.S. economy using the Medical Expenditures Panel Survey dataset. I find that the optimal set of policies is the one in which workers pay 30 percent of their health care bills while retirees pay 20 percent. Welfare gains mostly come from the healthy who prefers less generous health insurance policies.

Suggested Citation

  • Osman Furkan Abbasoglu, 2015. "Optimal Health Insurance in the Presence of Risky Health Behaviors," Working Papers 1508, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1508
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2015/15-08
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    More about this item

    Keywords

    Health insurance; Life cycle model; Medical expenditures;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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