Aging of Society and New Medical Technology: The Challenge for Health Insurers to Meet the Expectations of Consumers and Governments

4. Conclusions
The point of departure of this contribution is the observation that (Western) man‘s mirage is to stay perfectly healthy but drop dead when the time has come, resulting in a desire to attain so-called rectangularization of health status. This desire implies that the gap between effective and ideal health status is maximum just prior to death, triggering maximum use of healthcare services and latest medical technology, hence a ‘cost explosion just before death’. Although investments in health shortly before death have little return, they are undertaken nevertheless because the insured to not have to bear the financial consequences of their decisions. This ‘cost explosion just before death’ thus constitutes a major challenge to governments who look for ways to relieve their budgets from the cost of public health care. This challenge is likely to spill over to health insurers both social and private; however, private insurers, being subject to the pressure of competition, must act in accordance with the preferences of their members who are accustomed to having full access to existing and new therapies.
Especially private health insurers thus need to develop new policies that contain incentives for avoiding the ‘cost explosion just before death’. These policies stipulate Managed Care-type restrictions of provider choice, a delay in access to newest medical technology, or an increase of copayment. Because insurers cannot know proximity to death, they have to win over the aged with their marked status quo bias. Indeed, experimental evidence from the Netherlands and Germany suggests that while all age groups require compensation in terms of a reduced contribution to health insurance to accept restrictions in provider choice, this compensation increases with age. Still, status quo bias is much weaker in the Netherlands (where a pro-competitive reform had been enacted) than in Germany, pointing to the importance of the policy environment. On the whole, Managed Care-type policies must achieve substantial cost savings, to be passed on in the guise of premium reductions to consumers, to be accepted by members of (private) health insurance.
With regard to access to medical innovation, evidence from Switzerland suggests first that introducing a general delay of two years before new therapies are covered by Swiss social insurance would require compensation amounting to some 31 percent of average premium to be acceptable to those of age 65 and older. Interestingly however, it is the middle age group that would have to be compensated most for such a delay. Second, the mundane device of a hip protector designed to avoid fractures of the femur was found to meet resistance by the elderly. While they put positive value on the decrease in the risk of fracture, available brands afforded too little ease of handling and wearing comfort, resulting in a negative overall willingness to pay. Finally, measurement of willingness to pay for a new diabetes preparation in Germany permits to perform a cost-benefit analysis. Since the majority of non-diabetics would be prepared to pay as much as the extra cost of the preparation even if contributions would go up accordingly (provided diabetics contribute with some limited copayment), the cost-benefit criterion is satisfied, justifying inclusion of this particular preparation in the benefit list of German health insurance. In sum, there are medical innovations that should not be covered to begin with because they trigger negative overall valuations; others may be introduced with a delay provided this produces sufficient cost savings, again to be passed on by premium reductions; and still others are valued highly enough to justify the increase in premiums caused by their extra cost.
Admittedly, these findings are based on experimental evidence which is subject to all sorts of bias. Experiments therefore need to be repeated to check for biases and to be validated by actual decisions. Moreover, there are additional contractual innovations that have not been examined in this paper. One such innovation is conditional ‘carve-outs’ in health insurance (Eppert, 2013). Illnesses that are known to shorten remaining life expectancy of elderly members are put into separate categories. They trigger a lump-sum payment covering the expected value of the associated healthcare expenditure. This illness-specific indemnity insurance eliminates moral hazard because expenses in excess of the indemnity have to be paid by the insured. In the same vein, members who suffer from any illness causing a shortening of remaining life expectancy can be offered more generous coverage of the cost of long-term care (de Montesquieu, 2013) or increased annuities in pension insurance (Banthorpe, 2013). While these solutions provide welcome financial assistance to those affected, their indemnity characteristic again eliminates moral hazard.
In conclusion, the contractual innovations presented in this paper hold the promise that mitigating the ‘cost explosion just before death’ is not a hopeless endeavor. Since private health insurers are not bound to the solidarity principle calling for equal contributions regardless of true risk, they are better poised than social insurance schemes to launch these innovations of this. As for policymakers, the simple suggestion that follows is ‘laissez faire’, i.e. to alleviate rather than further increase regulatory burdens that hamper product innovation.

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