Working paper

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

Helmuth Cremer, and Jean-Marie Lozachmeur

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 di¤er 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 (specic reimbursements). We show that the induced equilibrium with copayments involves a lower producer price and a higher level of wel- fare for consumers. This results provides strong support for a reference price based reimbursement policy.

Keywords

Ex post moral hazard; health insurance competition; copayments; imper-; fect competition;

JEL codes

  • I11: Analysis of Health Care Markets
  • I13: Health Insurance, Public and Private
  • I18: Government Policy • Regulation • Public Health

Reference

Helmuth Cremer, and Jean-Marie Lozachmeur, Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers, TSE Working Paper, n. 21-1223, May 2021.

See also

Published in

TSE Working Paper, n. 21-1223, May 2021