Selection and Moral Hazard in Health Care: Effects of Voluntary Deductibles in the Netherlands

In the Netherlands, average healthcare expenditures of persons without a voluntary deductible are twice as high as average healthcare expenditures of persons with a voluntary deductible. When assessing the effects of voluntary cost-sharing in healthcare on healthcare expenditures, it is important to disentangle moral hazard from selection: are healthcare expenditures low because people pay (a bigger share of) their healthcare expenditures out-of-pocket? Or are people with higher cost-sharing levels healthier?

In this study, we separate selection from moral hazard for the combined mandatory and voluntary deductible in the Netherlands. We use proprietary claims data from Dutch health insurers and exploit with a panel regression discontinuity design that we can observe healthcare expenditures before and after the deductibles kick in for 18 year olds.

Our study shows that selection, not moral hazard, is the main effect explaining the difference in healthcare expenditures between persons with and without a voluntary deductible. Furthermore, we find that 18 year olds who never chose a voluntary deductible reduce their healthcare spending by 26 euros (on average) in response to a 100 euro increase in the (mandatory) deductible. However, for 18 year olds who chose a voluntary deductible (on top of the mandatory) we find that this choice does not result in a further reduction in healthcare spending. For the full population, we use a panel regression and find that for people who chose a voluntary deductible (on top of the mandatory) that a 100 euro increase in the deductible leads to an average reduction in healthcare spending of 25 euros per person. For the population as a whole these results suggest that lowering or abolishing the voluntary deductible in the Netherlands would modestly increase total healthcare expenditures and would improve risk solidarity to a small extent.