age and choice in health insurance: evidence from switzerland peter zweifel dept. of economics,...
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![Page 1: Age and Choice in Health Insurance: Evidence from Switzerland Peter Zweifel Dept. of Economics, University of Zurich peter.zweifel@econ.uzh.ch SAAN ACT](https://reader036.vdocuments.net/reader036/viewer/2022062618/5513cc8e5503463a298b4f20/html5/thumbnails/1.jpg)
Age and Choice in Health Insurance:Evidence from Switzerland
Peter Zweifel
Dept. of Economics, University of Zurich
SAAN ACT Launch Canberra, 29 November 2011
![Page 2: Age and Choice in Health Insurance: Evidence from Switzerland Peter Zweifel Dept. of Economics, University of Zurich peter.zweifel@econ.uzh.ch SAAN ACT](https://reader036.vdocuments.net/reader036/viewer/2022062618/5513cc8e5503463a298b4f20/html5/thumbnails/2.jpg)
Socioeconomic InstituteUniversity of Zürich
Motivation
• Rising health care expenditure due to more ample coverage in compulsory health insurance since 1996 in Switzerland
higher premiums for health insurance• Political debate focuses on the cost side • Here, issues relate to the benefit side:
...What is the compensation asked by Swiss consumers for accepting more stingy contracts?
... Will such new options not be rejected by the elderly in particular?
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Socioeconomic InstituteUniversity of Zürich
Age and Choice Behavior 3 Hypotheses
H1: increased variance in asset "health" caused by health problems demand for comprehensive coverage increases with age (Arrow, 1971)
H2: demand for health insurance follows the value of life over the life cycle demand for coverage decreases beyond the age of ca. 40 (Shepard and Zeckhauser, 1984)
H3: transition to retirement causes transitory reduction in variance of "health" and in value of life demand for coverage decreases temporarily
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Socioeconomic InstituteUniversity of Zürich
Discrete Choice Experiments (1)
• Allow individuals to express preferences for non-marketed goods
• Is based on the Random Utility Model (Luce, 1959; Manski and Lerman 1977; McFadden, 1973 and 2001)
– individuals choose alternative with the highest utility (hypothetical choice)
– choices are deterministic, but the researcher cannot observe all determinants of utility
![Page 5: Age and Choice in Health Insurance: Evidence from Switzerland Peter Zweifel Dept. of Economics, University of Zurich peter.zweifel@econ.uzh.ch SAAN ACT](https://reader036.vdocuments.net/reader036/viewer/2022062618/5513cc8e5503463a298b4f20/html5/thumbnails/5.jpg)
Socioeconomic InstituteUniversity of Zürich
Discrete Choice Experiments (2)
• Comparison of utility values determined by indirect utility function (i=individual, j=product alternative)
• Choice between alternatives j and
}], , s y,, bp[ v], , s y,, bp[ vPr{ P iliilllijiijjjij
),s,y;b,p(vV ijiijjjij
• Decomposition into a stochastic and a deterministic part
]}, s, y, bp[w], s y,, bp[wPr P iillliijjjijilij {
![Page 6: Age and Choice in Health Insurance: Evidence from Switzerland Peter Zweifel Dept. of Economics, University of Zurich peter.zweifel@econ.uzh.ch SAAN ACT](https://reader036.vdocuments.net/reader036/viewer/2022062618/5513cc8e5503463a298b4f20/html5/thumbnails/6.jpg)
Socioeconomic InstituteUniversity of Zürich
Setup of the Study (1)
• Sample of 1000 Swiss residents (older than 24)• Telephone survey (two contacts, in 2004)
– questions on utilization of the health care system and socioeconomic variables
– DCE: 10 choices per individual (status quo vs hypothetical alternative)
• Attributes considered:– annual deductible (deduct)– copayment rate (copay)– alternative treatment methods (altmed)– list of medications (generics)– restricted access to innovations (innovation)– monthly premium per capita (premium)
![Page 7: Age and Choice in Health Insurance: Evidence from Switzerland Peter Zweifel Dept. of Economics, University of Zurich peter.zweifel@econ.uzh.ch SAAN ACT](https://reader036.vdocuments.net/reader036/viewer/2022062618/5513cc8e5503463a298b4f20/html5/thumbnails/7.jpg)
Socioeconomic InstituteUniversity of Zürich
Setup of the Study (2)
Which of these contracts would you choose?
premium reduction - CHF 50premium: CHF 290/month
This alternative contract My current contract
access to innovative treatments with delay of 3 years
innovation (status quo)
status quogenerics (status quo)
fewer treatments are coveredalternative medicine (status quo)
copayment: 10%copayment: 10%
deductible: CHF 1500 deductible: CHF 230
alternative contractstatus quo insurance contract
Example of a choice card
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Socioeconomic InstituteUniversity of Zürich
Estimation strategy
• Random-effects Probit specification
• Model 1: Serves to check for the relevance of attributes
• Model 2: Designed to capture age-specific effects
simple model, only product attributes included
controlling for all relevant socioeconomic variables (interaction terms)
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Socioeconomic InstituteUniversity of Zürich
Results
• Derive marginal willingness-to-pay (WTP) for Model 1
marginal WTP (in CHF)
standard errors (bootstrapped)
deductible -0.03205 0.01099
copayment -18.91 3.30448
alt.med (more coverage)
12.36 3.01507
generics -13.77 3.14571
innovation -38.39 3.36486
ji
ji
premium/v
b/v:MWTP
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Socioeconomic InstituteUniversity of Zürich
2.970.001830.00543prem*a63+
-0.810.13653-0.10998rich
0.170.057810.00957hhsize
-1.490.12322-0.18403notreat
0.280.209560.05966poor
-2.630.17655-0.46353a63+
0.980.133520.13103a2539
-0.420.13744-0.05830sex
1.530.001410.00215prem*french
-2.290.00141-0.00322prem*a2539
zvalue s.e. coefficient
Table 1c: Random-effects Probit estimation results (selected interactions)
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Socioeconomic InstituteUniversity of Zürich
WTP for age groups (all interaction terms)- evaluated at the median individual of each subgroup
marg. WTP 25-39 marg. WTP 40-62 marg. WTP 63+
deduct -0.06(0.04)
deduct -0.05(0.02)
deduct -0.03(0.01)
copay -16.64(16.00)
copay -30.36(12.31)
copay -8.24(6.96)
alt.med(+) 67.51(44.88)
alt.med(+) 19.95(10.60)
alt.med(+) 0.77(6.38)
generics -31.77(22.00)
generics -13.81(9.57)
generics -8.91(6.90)
innov. -54.12(35.41)
innov. -25.50(11.57)
innov. -14.10(8.34)
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Socioeconomic InstituteUniversity of Zürich
Age-specific results
Compensation demanded for a 20% copayment
(status quo 10%)
Compensation demanded for delayed access to innovations (3 yrs)
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Socioeconomic InstituteUniversity of Zürich
Conclusion (1)
3 Hypotheses with respect to age
H1: increased asset variance demand for coverage increases with age
H2: demand follows the value of life demand for coverage decreases with age
H3: transition to retirement demand for coverage temporarily decreases with age
• H1 cannot be confirmed (contrary to popular belief)
• H2 and H3 tend to be confirmed for the median individual
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Socioeconomic InstituteUniversity of Zürich
Conclusion (2)
• Estimation results for socioeconomic groups indicate preference heterogeneity Uniform health insurance contracts cause a
welfare loss
• Contracts with certain restrictions but lower premiums might be attractive also for the elderly, affording them a utility gain
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Socioeconomic InstituteUniversity of Zürich
References (1)
• Arrow, K. (1971), Alternative approaches to the theory of choice in risk-taking situations, in: Arrow, K., Essays in the Theory of Risk-bearing, Amsterdam: North-Holland, 1-44.
• Ben-Akiva, M. and S.R. Lerman (1985), Discrete Choice Analysis, Cambridge: The MIT Press.
• Felder, S. (1997), Costs of dying: alternatives to rationing, Health Policy, 39: 167-176.
• Louvière, J.L., Hensher, D.A. and J.D. Swait (2000), Stated Choice Methods. Analysis and Applications, Cambridge: University Press.
• Luce, D. R. (1959), Individual Choice Behaviour, New York: Wiley and Sons.
• Manski, C. and S.R. Lerman(1977), The estimation of choice probabilities from choice based samples, Econometrica, 45(8): 1977-88.
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Socioeconomic InstituteUniversity of Zürich
References (2)
• McFadden (2000), Economic Choices, AER, 91(3): 351-378.• Ryan, M. and K. Gerard (2003), Using discrete choice
experiments to value health care programmes: current practice and future reflections, Applied Health Economics and Health Policy, 2(1): 55-64.
• Samuelson, W. and R.J. Zeckhauser (1988), Status quo bias in decision making, Journal of Risk and Uncertainty, 1: 7-59.
• Shepard, D.S. and R.J. Zeckhauser (1984), Survival and consumption, Management Science, 30(4): 423-439.
• Telser H. et al. (2004), Was leistet unser Gesundheitswesen?, Schlussbericht, Bern.