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

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.

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Replaces

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.

Reference

Helmuth Cremer, and Jean-Marie Lozachmeur, “Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers”, Journal of Health Economics, vol. 84, n. 102642, 2022.