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Genetic testing with primary prevention and moral hazard

Author

Listed:
  • Bardey, David
  • De Donder, Philippe
Abstract
We develop a model where a genetic test reveals whether an individual has a low or high probability of developing a disease. A costly prevention effort allows high-risk agents to decrease this probability. Agents are not obliged to take the test, but must disclose its results to insurers, and taking the test is associated to a discrimination risk. We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. If effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor too low. If the effort cost is not observable by insurers, moral hazard increases the value of the test if the effort cost is low. We offer several policy recommendations, from the optimal breadth of the tests to policies to do away with the discrimination risk.

Suggested Citation

  • Bardey, David & De Donder, Philippe, 2012. "Genetic testing with primary prevention and moral hazard," IDEI Working Papers 729, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:26027
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Simeon Schudy & Verena Utikal, 2015. "Does imperfect data privacy stop people from collecting personal health data?," TWI Research Paper Series 98, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    2. Bardey, David & De Donder, Philippe, 2019. "A Welfare Analysis of Genetic Testing in Health Insurance Markets with Adverse Selection and Prevention," TSE Working Papers 19-1035, Toulouse School of Economics (TSE), revised 22 Jan 2024.
    3. Goulão Catarina & Thibault Emmanuel, 2013. "Physical Activity and Policy Recommendations: A Social Multiplier Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 577-612, November.
    4. Jisang Yu & Nathan P. Hendricks, 2020. "Input Use Decisions with Greater Information on Crop Conditions: Implications for Insurance Moral Hazard and the Environment," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 826-845, May.
    5. Posey, Lisa L. & Thistle, Paul D., 2021. "Genetic testing and genetic discrimination: Public policy when insurance becomes “too expensive”," Journal of Health Economics, Elsevier, vol. 77(C).
    6. Fernando Antoñanzas & Carmelo A. Juárez-Castelló & Roberto Rodríguez-Ibeas, 2016. "Implementing personalized medicine with asymmetric information on prevalence rates," Health Economics Review, Springer, vol. 6(1), pages 1-8, December.
    7. Bardey, David & De Donder, Philippe & Mantilla, César, 2019. "How is the trade-off between adverse selection and discrimination risk affected by genetic testing? Theory and experiment," Journal of Health Economics, Elsevier, vol. 68(C).
    8. Diego C. Nocetti, 2018. "Ambiguity and the value of information revisited," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(1), pages 25-38, May.
    9. Christine Arentz, 2012. "Auswirkungen von Gentests in der Krankenversicherung," Otto-Wolff-Institut Discussion Paper Series 04/2012, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
    10. David Bardey & Philippe De Donder & César Mantilla, 2014. "Adverse Selection vs Discrimination Risk with Genetic Testing. An Experimental Approach," Documentos CEDE 12341, Universidad de los Andes, Facultad de Economía, CEDE.
    11. Simeon Schudy & Verena Utikal, 2012. "The Influence of (Im)perfect Data Privacy on the Acquisition of Personal Health Data," Working Paper Series of the Department of Economics, University of Konstanz 2012-12, Department of Economics, University of Konstanz.
    12. Tan, Kar Man & Gründl, Helmut, 2023. "Testing frequency and severity risk under various information regimes and implications in insurance," ICIR Working Paper Series 49/23, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    13. Daniel Gallacher & Nigel Stallard & Peter Kimani & Elvan Gökalp & Juergen Branke, 2022. "Development of a model to demonstrate the impact of National Institute of Health and Care Excellence cost‐effectiveness assessment on health utility for targeted medicines," Health Economics, John Wiley & Sons, Ltd., vol. 31(2), pages 417-430, February.
    14. Shooshan Danagoulian, 2018. "Policy of prevention: Medical utilization under a wellness plan," Health Economics, John Wiley & Sons, Ltd., vol. 27(11), pages 1843-1858, November.
    15. Simeon Schudy & Verena Utikal, 2018. "Does Imperfect Data Privacy Stop People from Collecting Personal Data?," Games, MDPI, vol. 9(1), pages 1-23, March.
    16. Filipova-Neumann, Lilia & Hoy, Michael, 2014. "Managing genetic tests, surveillance, and preventive medicine under a public health insurance system," Journal of Health Economics, Elsevier, vol. 34(C), pages 31-41.
    17. Mimra, Wanda & Nemitz, Janina & Waibel, Christian, 2020. "Voluntary pooling of genetic risk: A health insurance experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 864-882.
    18. Felix C.H. Gottschalk, 2019. "Why prevent when it does not pay? Prevention when health services are credence goods," Health Economics, John Wiley & Sons, Ltd., vol. 28(5), pages 693-709, May.
    19. David Bardey & Philippe De Donder, 2015. "Welfare Impacts of Genetic Testing in Health Insurance Markets: Will Cross-Subsidies Survive?," Documentos CEDE 17220, Universidad de los Andes, Facultad de Economía, CEDE.
    20. Peter, Richard & Richter, Andreas & Thistle, Paul, 2017. "Endogenous information, adverse selection, and prevention: Implications for genetic testing policy," Journal of Health Economics, Elsevier, vol. 55(C), pages 95-107.
    21. David Crainich, 2017. "Self-Insurance With Genetic Testing Tools," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(1), pages 73-94, March.
    22. Wanda Mimra & Janina Nemitz & Christian Waibel, 2019. "Voluntary pooling of genetic risk: A health insurance experiment," Post-Print hal-02499086, HAL.
    23. Johan N.M. Lagerlöf & Christoph Schotmüller, 2013. "Monopoly Insurance with Endogenous Information," Discussion Papers 13-15, University of Copenhagen. Department of Economics.
    24. Stefan Felder, 2022. "Decision thresholds with genetic testing," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(6), pages 1071-1078, August.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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