We present a simple graphical framework to illustrate the potential welfare gains from a "top-up" health insurance policy requiring patients to pay the incremental price for more expensive treatment options. We apply this framework to breast cancer treatments, where lumpectomy with radiation therapy is more expensive than mastectomy but generates similar average health benefits. We estimate the relative demand for lumpectomy using variation in distance to the nearest radiation facility, and estimate that the "top-up" policy increases social welfare by $700-2,500 per patient relative to two common alternatives. We briefly discuss additional tradeoffs that arise from an ex ante perspective. (JEL G22, I11, I13, I18)
Einav, Liran, Amy Finkelstein, and Heidi Williams.
"Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments."
American Economic Journal: Economic Policy,
Insurance; Insurance Companies; Actuarial Studies
Analysis of Health Care Markets
Health Insurance, Public and Private
Health: Government Policy; Regulation; Public Health