Advanced Search
MyIDEAS: Login to save this paper or follow this series

What Drives Differences in Health Care Demand? The Role of Health Insurance and Selection Bias

Contents:

Author Info

  • Dan Shane;
  • Pravin Trivedi;

Abstract

This paper employs an econometric model to parse di erences in health care utilization attributable to private health insurance and differences due to self-selection into insurance status, with specifc interest in selection on unobservable traits such as insurance preference or attitude toward health risks. The model has two components, one component to model insurance outcome, the other to model demand for care measured as the annual number of doctor visits and prescriptions filled. Recognizing the endogeneity of health insurance, the model allows for correlated unobserved heterogeneity by assuming a latent factor structure. Values for these latent factors are drawn through simulation and the model is estimated using maximum simulated likelihood methods. For the observable characteristics that predict need for health services we find evidence of adverse selection. However, we also find evidence of advantageous selection on the unobservable characteristics common to insurance choice and utilization. In other words, unobserved heterogeneity that increases the chances of being uninsured isassociated with higher utilization. Given this selection decomposition, there is no inherent conflict in describing the influence of both adverse and advantageous selection in utilization comparisons. After controlling for selection, the insurance incentive effect (ex-post moral hazard) is positive and signifcant. For the average individual, switching from no coverage to full coverage would result in 2 additional visits to the doctor per year (+160%) and 8 additional prescriptions lled (+207%).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.york.ac.uk/media/economics/documents/herc/wp/12_09.pdf
File Function: Main text
Download Restriction: no

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 12/09.

as in new window
Length:
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:yor:hectdg:12/09

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
Email:
Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/
More information through EDIRC

Related research

Keywords: Health care; Health insurance; Adverse selection; Treatment e ects model; Medical subsidy program;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Michael Anderson & Carlos Dobkin & Tal Gross, 2012. "The Effect of Health Insurance Coverage on the Use of Medical Services," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 1-27, February.
  2. Fang, Hanming & Keane, Michael & Silverman, Dan, 2006. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Working Papers 17, Yale University, Department of Economics.
  3. Jonathan Meer & Harvey S. Rosen, 2003. "Insurance and the Utilization of Medical Services," NBER Working Papers 9812, National Bureau of Economic Research, Inc.
  4. Partha Deb & Chenghui Li & Pravin K. Trivedi & David M. Zimmer, 2006. "The effect of managed care on use of health care services: results from two contemporaneous household surveys," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 743-760.
  5. De Meza, D. & Webb, D.C., 2000. "Advantageous Selection in Insurance Market," Discussion Papers 0007, Exeter University, Department of Economics.
  6. Gary V. Engelhardt & Jonathan Gruber, 2010. "Medicare Part D and the Financial Protection of the Elderly," NBER Working Papers 16155, National Bureau of Economic Research, Inc.
  7. Cardon, James H & Hendel, Igal, 2001. "Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 408-27, Autumn.
  8. Michelle M. Mello & Sally C. Stearns & Edward C. Norton, 2002. "Do Medicare HMOs still reduce health services use after controlling for selection bias?," Health Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 323-340.
  9. Amy Finkelstein & Sarah Taubman & Bill Wright & Mira Bernstein & Jonathan Gruber & Joseph P. Newhouse & Heidi Allen & Katherine Baicker, 2012. "The Oregon Health Insurance Experiment: Evidence from the First Year," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1057-1106.
  10. Robert Kaestner & Nasreen Khan, 2010. "Medicare Part D and its Effect on the Use of Prescription Drugs, Use of Other Health Care Services and Health of the Elderly," NBER Working Papers 16011, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:yor:hectdg:12/09. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Rawlings).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.