We exploit an age discontinuity in a Dutch disability insurance reform to identify the health impact of stricter eligibility criteria and reduced generosity. Our results show substantial adverse effects on life expectancy for women subject to the more stringent criteria. A €1,000 reduction in annual benefits leads to a 2.4 percentage points higher probability of death more than 10 years after the reform. This negative health effect is restricted to women with low pre-disability earnings. We find that the mortality rate of men subject to the stricter rules is reduced by 0.7 percentage points. The evidence for the existence of substantial health effects implies that policymakers considering a disability insurance reform should carefully balance the welfare gains from reduced moral hazard against losses not only from less coverage of income risks but also from deteriorated health.

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doi.org/10.1002/hec.3617, hdl.handle.net/1765/103546
Health Economics
Erasmus School of Economics

García-Gómez, P., & Gielen, A. (2017). Mortality effects of containing moral hazard: Evidence from disability insurance reform. Health Economics. doi:10.1002/hec.3617