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TABLE 5–2 Price Elasticity of Demand for Health Care: Selected Studies (c) 2010 Cengage Learning....
Transcript of TABLE 5–2 Price Elasticity of Demand for Health Care: Selected Studies (c) 2010 Cengage Learning....
(c) 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use
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TABLE 5–2Price Elasticity of Demand for Health Care: Selected Studies
Dependent variable Study Elasticity Country
Medical expenditures Eichner (1998)Newhouse and the InsuranceExperiment Group (1993)Phelps and Newhouse (1974) Rosett and Huang (1973) Van Vliet (2001)
-0.62 to -0.75
-0.17 to -0.22-0.04 to -0.12 -0.35 to -1.5 -0.079
United States
United StatesUnited StatesUnited StatesNetherlands
Hospital CareAdmissionsHospital InpatientHospital Outpatient
Manning et al. (1987)Davis and Russell (1972)Davis and Russell (1972)Bhattacharya et al. (1996)
-0.1 to -0.2-0.32 to -0.46-1.0-0.12 to -0.54
United StatesUnited StatesUnited StatesJapan
Patient Days Feldman and Dowd (1986) -0.74 to -0.80 United States
Physician Visits Cockx and Brasseur (2003) -0.13 to -0.03 Belgium
Total and Elective surgery
Cromwell and Mitchell (1986) -0.14 and -0.17 United States
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TABLE 5–2Price Elasticity of Demand for Health Care: Selected Studies
Dependent variable Study Elasticity Country
Nursing home careProbability of entering a nursing homeNumber of patientsPatient daysNumber of patients
Headen (1993)
Nyman (1989)Lamberton et al. (1986)Chiswick (1976)
-0.7
-1.7-0.76-2.3
United States
United StatesUnited StatesUnited States
Dental Services Manning and Phelps (1979)Mueller and Monheit (1988)
-0.5 to -0.7-0.18
United StatesUnited States
Prescription DrugsNumberExpenditures
Smith (1993)Contoyannis et al. (2005)
-.10-0.12 to -0.16
United StatesCanada
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The Impact of Insurance on the Demand for Medical Care
• RAND Health Insurance Study (HIS) (Manning et al., 1987)– Controlled experiment– Families from six sites– Various types of health insurance plans– Test: impact of differences in insurance
coverage on the demand for medical care
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The Impact of Insurance on the Demand for Medical Care
• Results– As the level of coinsurance rises, or the out-of-
pocket price of medical care increases• Consumers demand less medical care
– Consumers reduce medical expenditures largely by cutting back on the number of visits to health care providers and not on the amount spent on each visit
– As the level of coinsurance increased• The probability of using any medical services, along
with total medical expenditures, diminished
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The Impact of Insurance on the Demand for Medical Care
• Results– Negative impact of deductibles on the
consumption of medical care– Own-price elasticity of demand is sensitive to
the level of insurance• As the level of coinsurance drops, consumers
become less sensitive to price changes due to lower out-of-pocket payments
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TABLE 5–3Sample Means for Annual Use of Medical Care per Capita
Plan*Face-to-FaceVisits
OutpatientExpenses(1984 $)
InpatientDollars(1984 $)
TotalExpenses(1984 $)
Probabilityof Using AnyMedicalServices
Free25%50%95%Individual deductible
4.553.333.032.733.02
$340260224203235
$409373450315373
$749634674518608
86.878.877.267.772.3