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The Effects of Private Insurance on Measures of Health: Evidence from the Health and Retirement Study

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  • Avi Dor
  • Joseph Sudano
  • David W. Baker
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    Abstract

    In this paper we investigate whether the presence of private insurance leads to improved health status. Using the Health and Retirement study we focus on adults in late middle age who are nearing entry into Medicare. Estimation addresses endogeneity of the insurance participation decision in health outcome regressions. Two models are tested, an instrumental variables models, and a model with endogenous treatment effects due to Heckman (1978). Insurance participation and health behaviors enter with a lag to allow their effects to dissipate over time. Separate regressions were run for groupings of chronic conditions. We find that the overall impact of insurance on health tends to be significantly downwards biased if no adjustment for endogeneity is made. With corrections there is a four-fold increase in the insurance effect; yielding a 7 percent increase in the overall health measure for the uninsured. Results are consistent across IV and treatment effects models, and for all major groupings of medical conditions. Thus, the effect of private insurance on health may be larger than previously estimated. As for policy, expanding coverage to the uninsured should result in substantial health improvement. By conjecture, this is likely to reduce the need for health care when individuals retire and enter Medicare, potentially leading to savings.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9774.

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    Date of creation: Jun 2003
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    Handle: RePEc:nbr:nberwo:9774

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    1. Michael Baker & Mark Stabile & Catherine Deri, 2001. "What do Self-Reported, Objective, Measures of Health Measure?," NBER Working Papers 8419, National Bureau of Economic Research, Inc.
    2. Robert Kaestner & Theodore Joyce & Andrew Racine, 1999. "Does Publicly Provided Health Insurance Improve the Health of Low-Income Children in the United States," NBER Working Papers 6887, National Bureau of Economic Research, Inc.
    3. David M. Cutler, 1994. "A Guide to Health Care Reform," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 8(3), pages 13-29, Summer.
    4. Kenkel, Donald S, 1991. "Health Behavior, Health Knowledge, and Schooling," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(2), pages 287-305, April.
    5. T. D. McBride, . "Uninsured Spells of the Poor: Prevalence and Duration," Institute for Research on Poverty Discussion Papers, University of Wisconsin Institute for Research on Poverty 1131-97, University of Wisconsin Institute for Research on Poverty.
    6. Victor R. Fuchs, 2001. "The Financial Problems of the Elderly: A Holistic Approach," NBER Working Papers 8236, National Bureau of Economic Research, Inc.
    7. Susan Averett & Sanders Korenman, 1993. "The Economic Reality of the Beauty Myth," NBER Working Papers 4521, National Bureau of Economic Research, Inc.
    8. James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
    9. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, Econometric Society, vol. 47(1), pages 153-61, January.
    10. Kate Bundorf, M., 2002. "Employee demand for health insurance and employer health plan choices," Journal of Health Economics, Elsevier, Elsevier, vol. 21(1), pages 65-88, January.
    11. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
    12. Craig William Perry & Harvey S. Rosen, 2001. "The Self-Employed are Less Likely to Have Health Insurance Than Wage Earners. So What?," NBER Working Papers 8316, National Bureau of Economic Research, Inc.
    13. Vella, Francis & Verbeek, Marno, 1999. "Estimating and Interpreting Models with Endogenous Treatment Effects," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(4), pages 473-78, October.
    14. Jonathan Gruber, 2001. "Taxes and Health Insurance," NBER Working Papers 8657, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Beth J. Soldo & Olivia S. Mitchell & Rania Tfaily & John F. McCabe, 2006. "Cross-Cohort Differences in Health on the Verge of Retirement," NBER Working Papers 12762, National Bureau of Economic Research, Inc.

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