Transcript Slide 1

CPB Netherlands Bureau for Economic
Policy Analysis
Erasmus University Rotterdam
An application of
Albert Wong's
simulated lifecycles
to health savings
accounts
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Rudy Douven
(CPB, iBMG)
Health Savings Accounts
15 March 2012
Today is Celebration time
Albert Wong’s simulated life cycles
will be approved!!
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
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What are simulated health care life cycles?
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
What is so special about these cycles?
• Its new!
• We get better information about health care costs
- How are health care costs distributed over the life cycle?
- How large is the variation in costs among individuals?
- How large are our future health care costs, given the past?
› if we are 5, 45, 60, 90 years old?
How large are the differences for different types of care?
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
6 different health categories for cure (and 2 for care)
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Application: Health savings accounts
• Current research project by Rudy Douven (CPB, EUR), Remco
Mocking (CPB) and Albert Wong (RIVM, UvT).
• Idea project:
Are health savings accounts more efficient than annual cost
sharing mechanisms?
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Year 1: Mandatory annual deductible of 220 euros
If you need health care
Price larger than 220 euros
you
pay 220 euros
If you need little or no care
Price =P < 220 euros
you
save 220-P euros
which you put on your bank account
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Year 2: exactly the same rules apply
If you need health care
Price > 220 euros
you
pay 220 euros
If you need little or no care
Price P < 220 euros
you
save 220-P euros
which you put on your bank account
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Idea of individual mandatory deductible
• Advantage: less moral hazard
- Health care becomes more efficient
• Disadvantages: less solidarity
- Chronic ill pay every year 220 euros,
- Healthy people pay (much) less
• Main question:
- Can we improve on both aspects with health savings accounts?
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
How does a health savings account work?
If you need health care
If you need few health or no care
Price > 220 euros
you
pay 220 euros
Price P < 220 euros
you
pay X=220-P euros into
health savings account
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Year 2: Rules change!
You paid 220 euros in first year
If you need health care
Price larger than 220 euros
you
pay 220 euros
You paid less than 220 euros in first year
If you need little or no care
Price P < 220+X euros
total savings: 220+X-P euros
which you put on your bank account
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Idea of health savings accounts
• More solidarity
- Relatively healthy people pay money into their savings account to
use it if they become ill later
• More efficiency
- Relatively healthy people face higher deductible when becoming ill
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Expand idea of health savings accounts
• Length of saving period
- not 2 years, but from 18-65, from 0-end of life etc.
• Maximum deductible for Health Savings Account
- When ill use all money up on the account to a maximum amount
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
However life is not that easy!
• Consumers will react on HSA´s and form expectations
• HSA´s are less efficiënt than a deductible
- If health shock in period 2 is large and known to consumer
Idea:
Consumers know they have to spend money in period 2 and
therefore will spend more money in period 1 as well.
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Crucial for evaluation HSA´s
• How do individuals respond to (large) deductibles?
- some evidence from famous RAND experiment in the US
(Newhouse, 1997)
• Are consumer forward looking?
- some evidence says yes:
(Aron-Dine, Einav, Finkelstein, Cullen, NBER, 2012)
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
How do individuals form their expectations on
future health care costs?
•etremely complicated but?
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Simulate expectations with AW´s life cycles
• Individuals have perfect information about future costs
• Individuals know distribution of future costs
• Chronically ill have different expectations
etc. etc.
• Allow for time preference for consumer choice
- future payment is less valuable than current payment
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Some first experiments with our simulation model
• Setup model
• Consider only individuals between 18-65
• Perfect information about future, time preference is 0
• Fixed premiums for each individual
Model 1: Annual Deductible
Model 2: Health Savings Account
• Deductible: 150 euros
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HSA from age 18-65
Payment out of HSA to consumer at age 65
Annual payment in HSA: 150 euros
Maximum deductible: 1000 euros
You pay OOP only with money in HSA
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
A first example
Full Insurance
% fixed premium
= 100%
% out of pocket payments =
0%
% less health care
=
0%
Deductible
Health Savings Account
(150 euro)
90.9%
8.3%
0.8%
(max deductible 1000 euro)
88.0%
11.8%
0.2%
First Example:
• Health savings account model less efficient than annual deductible model
• Solidarity unclear
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
Future research: continue search for the holy grail:
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Vary with size of annual payment into HSA
Vary with maximum deductible size for HSA
Allow for negative savings in HSA
Vary time span of HSA
Vary with price sensitivity effect for consumers
Apply HSA for different age groups
Vary with different types of care
- General practicitoners
- Pharmaceuticals
- Hospital care
- Physiotherapy etc.
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012
CPB Netherlands Bureau for Economic Policy Analysis
Health Savings Accounts
15 March 2012