Kenneth Arrow and the changing economics of health care

Introducing voluntary private health insurance in a mixed medical economy: are Hong Kong citizens willing to subscribe?

BACKGROUND

Struggling to correct the public-private imbalance in its health care system, the Hong Kong SAR Government seeks to introduce a government-regulated voluntary health insurance scheme, or VHIS, a distinctive financing instrument that combines the characteristics of private insurance with strong government regulation. This study examines citizens' responses to the new scheme and their willingness to subscribe.

METHODS

First-hand data were collected from a telephone survey that randomly sampled 1793 Hong Kong adults from September 2014 to February 2015. Univariate and multivariate methods were employed in data analysis.

RESULTS

More than one third of the respondents explicitly stated intention of subscribing to the VHIS, a fairly high figure considering the scheme's voluntary nature. Multivariate analysis revealed moderate evidence of adverse selection, defined as individuals' opportunistic behaviors when making insurance purchasing decision based on their own assessment of risks or likelihood of making a claim.

CONCLUSION

The excellent performance of Hong Kong's public medical system has had two parallel impacts. On the one hand, high-risk residents, particularly the uninsured, do not face a pressing need to switch out of the overloaded public system despite its inadequacies; this, in turn, may reduce the impact of adverse selection that may lead to detrimental effects to the insurance market. On the other hand, high satisfaction reinforces the interests of those who have both the need for better services and the ability to pay for supplementary insurance. Furthermore, the high-risk population demonstrates a moderate interest in the insurance despite the availability of government subsidies. This may offset the intended effect of the reform to some extent.

John Nyman and the Economics of Health Care Moral Hazard

In 2003, John Nyman published The Theory of Demand for Health Insurance. His principal contributions are (1) to replace the previously unexamined axiom of risk avoidance with the axiom of welfare maximization; (2) to uncover a misinterpretation in the literature on moral hazard, namely, the insurance payoff as a price reduction, rather than as an income transfer. The immediate consequence of these reformulations is to recognize insurance-induced health care utilization as resulting in an increase in social welfare. Despite its evident validity and enormous implications, Nyman’s work has received very little attention or recognition in the health economics literature.

Regulating private health insurance to serve the public interest: policy issues for developing countries

Private health insurance plays a large and increasing role around the world. This paper reviews international experiences and shows that private health insurance is significant in countries with widely different income levels and health system structures. It contrasts trends in private health insurance expansion across regions and highlights countries with particularly important experiences of private coverage. It then discusses the regulatory approaches and policies that can structure private health insurance markets in ways that mobilize resources for health care, promote financial risk protection, protect consumers and reduce inequities. The paper argues that policy makers need to confront the role that private health insurance will play in their health systems and regulate the sector appropriately so that it serves public goals of universal coverage and equity.

Will insured citizens give up benefit coverage to include the uninsured?

OBJECTIVE

To describe the willingness of insured citizens to trade off their own health benefits to cover the uninsured.

DESIGN

Descriptive study of individual and group decisions and decision making using quantitative and qualitative methods.

SETTING AND PARTICIPANTS

Twenty-nine groups of citizens (N = 282) residing throughout Minnesota.

INTERVENTIONS

Groups participated in Choosing Healthplans All Together (CHAT), a simulation exercise in which participants choose whether and how extensively to cover health services in a hypothetical health plan constrained by limited resources. We describe individual and group decisions, and group dialogue concerning whether to allocate 2% of their premium to cover uninsured children in Minnesota, or 4% of their premium to cover uninsured children and adults.

MEASUREMENTS AND MAIN RESULTS

While discussing coverage for the uninsured, groups presented arguments about personal responsibility, community benefit, caring for the vulnerable, social impact, and perceptions of personal risk. All groups chose to insure children; 22 of 29 groups also insured adults. More individuals chose to cover the uninsured at the end of the exercise, after group deliberation, than before (66% vs 54%; P < .001). Individual selections differed from group selections more often for the uninsured category than any other. Nevertheless, 89% of participants were willing to abide by the health plan developed by their group.

CONCLUSION

In the context of tradeoffs with their own health insurance benefits, groups of Minnesotans presented value-based arguments about covering the uninsured. All 29 groups and two thirds of individuals chose to contribute a portion of their premium to insure all children and most groups chose also to insure uninsured adults.