Can the healthcare system be protected from overload without compromising patient welfare?
In 2022, insured individuals in basic health insurance paid an average of 581 francs out of pocket. But why does cost-sharing exist at all, how is it structured, and why is it politically controversial? We will delve into these questions in more detail below.
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Health insurance serves to mitigate the financial consequences of illness. It covers a significant portion of treatment costs in the event of illness, even when these costs exceed the insurance premiums paid by the insured individual. This creates a transfer from healthy to ill individuals, which is the primary purpose of insurance. However, the fact that an individual does not bear the full cost of treatment in the event of illness has an unintended side effect: insurance coverage creates an incentive to demand more services than one would if paying the full cost out of pocket. This increase in demand is referred to as “moral hazard”. Numerous empirical studies, including large randomized experiments, have shown that moral hazard exists and can be mitigated through cost-sharing. The purpose of cost-sharing is to discourage excessive use of healthcare services.
Organisation of cost sharing
Cost-sharing consists of the “deductible” and the “co-payment”. While there are some options for choosing the deductible, the co-payment is fixed at 10% with a set maximum amount. In the chart, we examine three adult individuals, assuming they all chose the lowest deductible of 300 francs; the maximum co-payment for adults is 700 francs. The first person has currently used services amounting to 150 francs. Since this is below the deductible, they must pay the full amount themselves. The second person has received services totaling 5,500 francs. They pay the deductible of 300 francs plus 10% of the amount exceeding the deductible (5,200 francs), which equals 520 francs. This totals 820 francs (300 + 520). The insurance covers the remaining 4,680 francs of the treatment costs. The third person has used services totaling 8,000 francs. They also pay the deductible and the 10% co-payment. However, the co-payment is capped at a maximum of 700 francs, which applies here. This person pays a total of 1,000 francs out of pocket (300 deductible + 700 co-payment), while the remaining 7,000 francs are covered by insurance. Because cost-sharing is applied annually, the third person does not have to contribute further to their costs for the rest of the year, even if they use additional services. The other two individuals, however, will continue to pay cost-sharing until they reach the maximum co-payment amount.
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Although cost-sharing has a cost-reducing effect and thereby helps to moderate premiums, it is somewhat controversial from a socio-political perspective. On the one hand, cost-sharing is independent of the income and wealth of insured individuals, which results in a higher financial burden for poorer people. As a result, there is a trade-off between cost reduction and social acceptability when determining the level of cost-sharing. The last adjustment to the deductible and the maximum co-payment amount was made in 2004. Since then, there have been several attempts to increase cost-sharing, but all have failed due to this trade-off, favoring social acceptability. On the other hand, there is occasional concern that insured individuals might forgo necessary medical services because they cannot afford the cost-sharing. This could negatively impact their medical condition, potentially leading to higher costs in the long term. To address this, cost-sharing is set lower for certain groups, such as children and pregnant women.
The existing trade-off fundamentally requires a political decision. However, such a decision is only possible if there is clarity about the effects of cost-sharing—both desired and undesired. Our research projects listed below aim to better understand the impact of cost-sharing, providing robust foundations for the political decision-making process.