Public health insurance. Pareto-efficient allocative improvements through differentiated copayment rates

Abstract

Moral hazard in an insurance system can be reduced by introducing copayments. Unfortunately, this may exert undesired distribution effects, which are generally regarded to be of specific relevance in the health sector. The article concentrates on an obligatory social health insurance system and tries to show that rightly adjusted and double-differentiated copayment rates can at least partially resolve the dilemma between allocation and distribution. The differentiation considered is with respect to income and to treatment sickness costs. The argument is presented by means of diagrammatic exposition.