ABSTRACT
Moral hazard in the catastrophic disease health insurance has challenged the sustainability of med-ical budget funds. This paper studies the health care reimbursement rule to counteract moral hazard. Theoretical a-nalysis shows that in the target to maximize social welfare, the optimal rule is to provide consumers who choose low-cost treatment with subsidies and charge a co-payment to those who choose high-cost one. Adopting simulation ap-proach shows that this difference with respect to single reimbursement rules, healthcare expenses and medical insur-ance premiums will be significantly reduced compared to a unified co-payment ratio. This paper also selects the sensitivity test simulation parameters and the results show that different values will not change the herein disclosed mechanism results.