Risk-taking in vaccination, surgery, and gambling environments: Evidence from a framed laboratory experiment.

Vaccination involves a tradeoff between two risky alternatives, namely, susceptibility and immunization. By designing a controlled laboratory experiment, we investigate the association between risk preferences and immunization decisions. To contrast the role of risk preferences in vaccination decisions with other domains, we implemented four frames: vaccination, surgery, complex neutral, and simple neutral. We found direct framing effects for females but not for males. For the former, the demand for the safer alternative is significantly larger in the surgery frame than in all other frames. For male subjects, we found a significant association between stated risk preferences and choice behavior in the simple neutral frame but not in the other three frames. For female subjects, we observed the exact opposite. Although the complexity of the decision problem matters, there is no indication of differential roles of risk preferences for a given complexity. We found that the share of consistent choices is significantly larger in the surgery frame as compared to the two neutral frames, that is, context improves decision making. This does not apply to the vaccination frame, so there is something about vaccinations that prevents individuals from better understanding the decision problem at hand.

To Vaccinate or to Procrastinate? That is the Prevention Question.

Invoking Yaari's dual theory, we develop a model of individual vaccination decisions that incorporates quasi-hyperbolic discounting, risk aversion, and information. We test the resulting hypotheses for the flu season 2010/2011 using a representative German data set. We find a significant impact of time preferences on immunization decisions. The impact of the discount factor is significantly negative for exponential discounters. While present-biased individuals' demand for vaccination is not statistically different from the one of exponential discounters, future-biased individuals have a significantly higher probability to vaccinate. Stratification by gender reveals that these effects are entirely driven by men. That is, time preferences have no explanatory power for the vaccination decisions of women. This also applies to risk aversion, where more risk aversion implies a significantly higher probability to vaccinate for men but not women. All information measures turn out significant. Well-informed individuals have a much higher propensity to vaccinate than poorly informed individuals. If policy makers aim at improving immunization rates, then our results suggest that public policy should concentrate on providing easily accessible and concise information on the flu and the flu shot. Our results on time preferences and risk preferences imply a rather inactive role for public policy. Copyright © 2015 John Wiley & Sons, Ltd.

Financing and funding health care: Optimal policy and political implementability.

Health care financing and funding are usually analyzed in isolation. This paper combines the corresponding strands of the literature and thereby advances our understanding of the important interaction between them. We investigate the impact of three modes of health care financing, namely, optimal income taxation, proportional income taxation, and insurance premiums, on optimal provider payment and on the political implementability of optimal policies under majority voting. Considering a standard multi-task agency framework we show that optimal health care policies will generally differ across financing regimes when the health authority has redistributive concerns. We show that health care financing also has a bearing on the political implementability of optimal health care policies. Our results demonstrate that an isolated analysis of (optimal) provider payment rests on very strong assumptions regarding both the financing of health care and the redistributive preferences of the health authority.

Public and private health insurance in Germany: the ignored risk selection problem.

We investigate risk selection between public and private health insurance in Germany. With risk-rated premiums in the private system and community-rated premiums in the public system, advantageous selection in favor of private insurers is expected. Using 2000 to 2007 data from the German Socio-Economic Panel Study (SOEP), we find such selection. While private insurers are unable to select the healthy upon enrollment, they profit from an increase in the probability to switch from private to public health insurance of those individuals who have experienced a negative health shock. To avoid distorted competition between the two branches of health care financing, risk-adjusted transfers from private to public insurers should be instituted.

Public and private health-care financing with alternate public rationing rules.

We develop a model to analyze parallel public and private health-care financing under two alternative public sector rationing rules: needs-based rationing and random rationing. Individuals vary in income and severity of illness. There is a limited supply of health-care resources used to treat individuals, causing some individuals to go untreated. Insurers (both public and private) must bid to obtain the necessary health-care resources to treat their beneficiaries. Given individuals' willingnesses-to-pay for private insurance are increasing in income, the introduction of private insurance diverts treatment from relatively poor to relatively rich individuals. Further, the impact of introducing parallel private insurance depends on the rationing mechanism in the public sector. We show that the private health insurance market is smaller when the public sector rations according to need than when allocation is random.

Optimal public provision of nursing homes and the role of information.

Increasing demand for long-term care poses at least five challenges to the policy-maker: (i) How should care be supplied, within a nursing home or within the family? (ii) What level of care should be provided in the different arrangements? (iii) How do the answers relate to the severity of dependence? (iv) How can financial strain be mitigated for families with severely dependent members? (v) What is the role of information constraints for the nature and scope of optimal long-term care policy? We consider a theoretical model of long-term care provision under adverse selection to address these challenges. Our main - and remarkably robust - result is that nursing home care facilitates self selection and mitigates and possibly eliminates distortions in caring levels and transfers. Informational asymmetries may thus lead to care being provided too often within institutions rather than within a family context.

Gatekeeping in health care.

We study the competitive effects of restricting direct access to secondary care by gatekeeping, focusing on the informational role of general practitioners (GPs). In the secondary care market there are two hospitals choosing quality and specialization. Patients, who are ex ante uninformed, can consult a GP to receive an (imperfect) diagnosis and obtain information about the secondary care market. We show that hospital competition is amplified by higher GP attendance but dampened by improved diagnosing accuracy. Therefore, compulsory gatekeeping may result in excessive quality competition and too much specialization, unless the mismatch costs and the diagnosing accuracy are sufficiently high. Second-best price regulation makes direct regulation of GP consultation redundant, but will generally not implement first-best.

Risk selection in the German public health insurance system.

The German statutory health insurance market was exposed to competition in 1996. To limit direct risk selection the regulator required open enrollment. As the risk compensation scheme, introduced in 1994, is highly incomplete, substantial incentives for risk selection exist. Due to their low premiums, company-based sickness funds have been able to attract a lot of new members. We analyze, using data from the German Socio-Economic Panel, the determinants of switching behavior from 1995 to 2000. There is no evidence for selection by funds. The success of the company-based sickness funds originates in incomplete risk adjustment together with the negative correlation between health status and switching costs.