The effects of financial incentives in health care and social insurance
Financial Incentives Shape Healthcare Utilization, Benefits, and Labor Force Participation
Financial incentives in the Dutch healthcare and social security system have a major impact on the choices people make and on the costs to society. This is evident from economist Lucy Kok’s research on the effects of policy on healthcare, benefits, and employment.
Care Facilities Are Financially More Attractive
One of the most striking conclusions is that, from a societal perspective, living independently at home is often less expensive for older adults than staying in a nursing home. Yet many older adults choose a care facility because it is financially more attractive. The out-of-pocket cost for nursing home care is often lower than the total cost of living at home. Municipalities and health insurers also generally spend less on inpatient care, meaning that the financial incentives do not align with what is most efficient for society as a whole.
The study also shows that financial incentives for municipalities can be effective. A 2004 reform, in which large municipalities were given a fixed budget for social assistance expenditures instead of full reimbursement from the national government, led to a clear decline in the number of social assistance recipients. On average, the number of people on social assistance fell by 14 percent.
2015 Wajong Reform
A far-reachingreform of the Wajong in 2015 also had major consequences. From that point on, young people capable of working were no longer eligible for the program and instead fell back on social assistance. As a result, the inflow into the Wajong program fell by approximately 40 percentage points. Their average benefit income decreased by more than 10,700 euros per year. Part of this loss of income was offset by the fact that more young people began working and earned more income from employment. Social assistance also offset part of the loss of income.
In addition to these empirical studies, the dissertation also includes a theoretical analysis of the societal value of healthcare. According to Kok, existing cost-benefit analyses do not take sufficient account of the impact of health interventions on the time people spend on work, leisure, and recovery. By taking these effects into account, the societal benefits of healthcare can be determined more accurately.
Remuneration of Medical Specialists
Finally, Kok compares the remuneration of medical specialists in six European countries. After adjusting international income data, it appears that English medical specialists had the highest income in 2010, followed by Dutch specialists. The number of physicians per capita appears to be the most important factor: in countries with relatively few physicians, the incomes of medical specialists are generally higher.
According to Kok, the results underscore the importance of well-designed financial incentives. Policy can effectively influence behavior, but when individual interests do not align with the public interest, unintended and costly outcomes can arise.
More information about the dissertation will follow