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Healthcare Demand in the Presence of Discrete Price Changes
Michael Gerfin1, Boris Kaiser1, Christian Schmid1
1Department of Economics, University of Bern, Bern, Switzerland.
Abstract:
Deductibles in health insurance generate nonlinear budget sets and dynamic incentives. Using detailed individual health expenditure data from a Swiss health insurer, we estimate the response in healthcare demand to the discrete price increase generated by resetting the deductible at the start of each calendar year. We find that for individuals with high deductibles, healthcare demand drops by 27%. The decrease is most pronounced for inpatient care and prescription drugs. By contrast, for individuals with low deductibles, there is no significant change in healthcare demand (except for prescription drugs). Overall our results suggest that healthy individuals respond much stronger to the price change.
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