International health service research reveals a uniform tendency in practically all industrialised countries: an increasing shift of costs from solidarity-based financing to private households. Legislators and advisors usually justify this policy through the need to encourage cost-consciousness and especially “individual responsibility”. Economists consider cost sharing in health care to be necessary to prevent abuse of the welfare state. They expect user charges and co-payments to motivate a more “rational” utilisation of health care and, thus, the financial stabilisation of health systems.
Many politicians and economists base their assumptions about the “health market” on the theorem of demand-side moral hazard. This model transforms patients into rational “utility maximisers” consuming services beyond their needs thereby causing welfare losses to society as a whole. Moral hazard in health insurance belongs to the standard repertoires of economic textbooks.
The present study analyses the extensive theoretical and empirical literature on patient cost sharing published during the last forty years. The results show that persuasive evidence for demand-side moral hazard is still lacking. Furthermore, the claimed empiricism turns out to be inappropriate for providing evidence. Science health service research and clinical studies instead suggest that health insurance beneficiaries are not aiming to abuse the health system. In fact, introducing patient cost sharing seems to endanger proper health care since it deters the sick from claiming benefits. The idea of “rational” use transpires to be out of touch with reality.
After a systematic in-depth review of current research on the topic, the author concludes that moral hazard in health insurance is a bogey of academic economic theory. Adequate reality-based evidence for implementing patient user fees and co-payments is lacking. In view of the detrimental effects on health service utilisation, he advises cancelling existing co-payment arrangements and abandoning cost-sharing policies.
