The Effect Of Supplemental Insurance On Health Care Demand With Multiple Information: A Latent Class Analysis
AbstractThe Medicare program, which provides insurance coverage to the elderly in the United States, does not protect them fully against high out-of-pocket costs. For this reason private supplementary insurance, named Medigap, has been available to cover Medicare gaps. This paper studies how Medigap affects the utilization of health care services. The decision to take out supplemental insurance is likely to be infuenced by unobservable attributes such as actual risk type and insurance preferences. Empirical appraisals to this problem typically rely on the recursive bivariate probit. We exploit the Health and Retirement Study data and some recent advances on latent class analysis to jointly model the insurance and health care decisions. Results show the presence of unobserved `types' representing different preferences and risk levels. We compare our results to those obtained by the probit and the bivariate probit and find the residual effect of insurance on health care not significant.
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Bibliographic InfoPaper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 09/03.
Date of creation: Mar 2009
Date of revision:
Contact details of provider:
Postal: HEDG/HERC, Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/res/herc/research/hedg/
More information through EDIRC
Health Care Demand; Latent Class Models; Health Insurance; Asymmetric Information; Medigap.;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- I10 - Health, Education, and Welfare - - Health - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-HEA-2009-03-14 (Health Economics)
- NEP-IAS-2009-03-14 (Insurance Economics)
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