Are consumer payments necessary in an efficient health care system?

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This paper is concerned with a policy issue associated with the specification of insurance policies for medical care expenditures, viz. whether health insurance schemes should incorporate provisions (deductibles and/or co-insurance rates) such that patients bear some part of the cost of any medical service. The we 1 fare economic literature on this issue is shown to be can fused as a result of non-recognition of the significance of risk aversion. When the issue is viewed as a problem of port folio selection it is clear that no simple policy conclusion is forthcoming. With respect to the pragmatic argument that co-payments will reduce health expenditures it is shown that such an effect is "once-off", is quantitatively small and has the effect of increasing administrative coats. It is argued that the distributional effects may be adverse for persons with low incomes.

Original languageEnglish
Pages (from-to)128-146
Number of pages19
JournalEconomic Analysis and Policy
Issue number2
Publication statusPublished - 1 Jan 1984
Externally publishedYes

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