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Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers

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  • Cremer, Helmuth
  • Lozachmeur, Jean-Marie

Abstract

This paper studies a market for a medical product in which there is perfect competition among health insurers, while the good is sold by a monopolist. Individuals differ in their severity of illness and there is ex post moral hazard. We consider two regimes: one in which insurers use coinsurance rates (ad valorem reimbursements) and one in which insurers use copayments (specific reimbursements). We show that the induced equilibrium with copayments involves a lower producer price and a higher level of welfare for consumers. This results provides strong support for a reference price based reimbursement policy.

Suggested Citation

  • Cremer, Helmuth & Lozachmeur, Jean-Marie, 2021. "Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers," TSE Working Papers 21-1223, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:125695
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    References listed on IDEAS

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    Cited by:

    1. Helmuth Cremer & Jean-Marie Lozachmeur, 2024. "Nonlinear Reimbursement Rules for Preventive and Curative Medical Care," CESifo Working Paper Series 11186, CESifo.

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    More about this item

    Keywords

    Ex post moral hazard; health insurance competition; copayments; imper-; fect competition;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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