The Economics of Incentive-Based Health Care Plans

Abstract

Medical savings accounts (MSAs) belong to a larger class of incentive-based health care plans. Using a model that allows the consumer to invest in healthy activities, we examine the efficiency properties of incentive plans and compare them to traditional full-coverage and deductible plans, under both experience rating and community rating. The model also is extended to include utilization of preventive health care. Properly constructed incentive plans have the capacity to induce socially efficient levels of healthy activities and preventive care, raising the expected wealth of consumers without reducing insurers' profits.-1- The Economics of Incentive-Based Health Care PlansDennis Heffley and Thomas Miceli Department of Economics, University of Connecticut July 13, 1997 ABSTRACT Medical savings accounts (MSAs) belong to a larger class of incentive-based health care plans. Using a model that allows the consumer to invest in healthy activities, we examine the efficiency properties of incentive plans and compare them to traditional full-coverage and deductible plans, under both experience rating and community rating. The model also is extended to include utilization of preventive health care. Properly constructed incentive plans have the capacity to induce socially efficient levels of healthy activities and preventive care, raising the expected wealth of consumers without reducing insurers' profits.

Do Hmos Encourage Prevention? An Analysis of Alternative Health Care Plans

“…The model is based on Heffley and Miceli (1998) and consists of a single risk-neutral consumer and a single provider of health care. 3 The consumer chooses some amount of preventive care, x, during healthy states and receives treatment in the event of illness.…”

Health savings accounts in the United States of America

“…In 1979, the Office of Education in Mendocino County adopted a stay-well plan in which employees' first-dollar coverage plan was replaced with a US$500 deductible policy from the same insurer, and the annual premium savings of about US$480 per worker were used to establish a side fund. Unused balances remaining in the side fund would be remitted to the employee when he or she quit or retired (Heffley & Miceli, 1998;Bogetic & Heffley, 2007).…”

Lifestyle-related diseases and individual responsibility through the prism of solidarity

“…Dubois 19 provides an overview of existing modes of distinguishing between people with 'healthy' versus 'unhealthy' lifestyles in health-care policy: † For example, in the USA there is a trend towards more risk stratification in private insurance, 20 primarily along the lines of smoking and body mass index (BMI). Simultaneously, there has been an increase in the policies relying on co-insurance and deductibles 20 or incentive-based plans and bonus systems rewarding 'healthy' lifestyles or participation in prevention programmes, 21,22 which include 'malus' elements (i.e. withholding of services based on individual health behaviour); 8 † In Europe, where health care relies less overall on private health insurance than it does in the USA, the individualization of the responsibility for risk is reflected in the rhetoric of the 'active' welfare state.…”