Using a game-theoretic approach to design optimal health insurance for chronic disease

Abstract

Health insurance has a significant effect on medical utilization and expenditures. This study analyzes the problem of health care cost-sharing policies to treat individuals with chronic disease. This problem consists of determining optimal cost-sharing policies for a public/private insurer as well as an insured’s optimal decision on multiple treatments based on healthcare expenditures and health status to minimize respective costs. We treat this problem of cost-sharing design as a stochastic Stackelberg game, in which the framework captures the long-term interactions between an insurer and an insured, subject to underlying uncertainties of disease progression (the transition of the insureds across health states). A realistic case of hypertensive heart disease is examined. We analyze the effect of cost-sharing policies on insureds with different characteristics (age and income). The analysis results show that the behavior of insureds regarding medical utilization and treatment adherence complements related case study reviews. Moreover, multi-tiered cost-sharing benefits are also analyzed. To the best of our knowledge, this is the first game-theoretic application considering the association between cost-sharing and dynamic health outcomes for chronic diseases. The proposed framework can be applied to incent the insureds with multi-stage chronic diseases to promote healthcare service choices by designing flexible and differential cost-sharing provisions for specific insured groups.