infonet-economy

Microeconomic theory predicts that if patients are fully insured and providers are paid fee-for-service, utilization of medical services exceeds the efficient level (‘moral hazard effect’).
In Switzerland, both demand-side cost sharing and upply-side cost sharing have been introduced to mitigate this problem. Analyzing a panel dataset of about 150,000 adults, we find both types of cost sharing to be effective in curtailing the use of medical services. However, demand-side cost sharing options are preliminarily chosen by individuals in excellent health, causing ‘true’ cost savings achieved by supply-side cost sharing to be more important.