Template-Type: ReDIF-Paper 1.0
Author-Name: Jouko Verho
Author-Name-First: Jouko
Author-Name-Last: Verho
Author-Email: jouko.verho@vatt.fi
Author-Workplace-Name: VATT Institute for Economic Research and Finnish Center of Excellence in Tax Systems Research (FIT)
Author-Name: Jarkko Harju
Author-Name-First: Jarkko
Author-Name-Last: Harju
Author-Email: jarkko.t.harju@tuni.fi
Author-Workplace-Name: Tampere University, Finnish Centre of Excellence in Tax Systems Research (FIT) and VATT Institute for Economic Research
Title: Moral Hazard in Drug Purchases
Abstract: We study the moral hazard effects of the drug copayment threshold in Finland using detailed prescription drug purchase data. The analysis reveals that the average drug costs increase discontinuously by 17% at the threshold above which out-of-pocket drug costs decrease substantially. Our results suggest an average price elasticity of -0.17, which indicates evident moral hazard costs. Approximately 80% of the overall effect is due to individuals buying drugs in larger quantities rather than purchasing higher-priced drugs. The heterogeneity analysis suggests that the responses are largest for drug categories taken on an as-needed rather than a regular basis.
Length: 39 pages
Creation-Date: 2023-05
Publication-Status: Published in FIT Working Paper Series, Finnish Center of Excellence in Tax Systems Research
File-URL: https://verotutkimus.fi/verotutkimus/wp-content/uploads/2023/05/FIT-WP-12-Moral-Hazard-in-Drug-Purchases-290523-1.pdf
File-Format: Application/pdf
File-Function: First version, 2023
Number: 12
Classification-JEL: I10, H51, D12
Keywords: Prescription drugs, Moral hazard, Health insurance
Handle: RePEc:fit:wpaper:12