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The Effect Of Supplemental Insurance On Health Care Demand With Multiple Information: A Latent Class Analysis

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  • Dardanoni V
  • Li Donni P

Abstract

The 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 Info

Paper 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.

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Date of creation: Mar 2009
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Handle: RePEc:yor:hectdg:09/03

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Postal: HEDG/HERC, Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/
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Related research

Keywords: Health Care Demand; Latent Class Models; Health Insurance; Asymmetric Information; Medigap.;

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Cited by:
  1. Omar Paccagnella & Vincenzo Rebba & Guglielmo Weber, 2013. "VOLUNTARY PRIVATE HEALTH INSURANCE AMONG THE OVER 50s IN EUROPE," Health Economics, John Wiley & Sons, Ltd., vol. 22(3), pages 289-315, 03.

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