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Dynamics of Consumer Responses to Medical Price Changes

Author

Listed:
  • Norihiro Komura
  • Shun-Ichiro Bessho

Abstract

How individuals respond to coinsurance rates is fundamental for insurance market design, but most existing estimates speak only to short-run responses. We exploit a unique policy experiment that increased the coinsurance rate some elderly individuals face when they are aged 70–74 but not before or after. Higher coinsurance rates have an immediate and persistent effect on health care expenditure, and a sizable share of this effect persists after age 75. We find no evidence that higher coinsurance rates affect health. These results suggest that health care utilization depends on dynamic factors other than health stock, such as habits.

Suggested Citation

  • Norihiro Komura & Shun-Ichiro Bessho, 2025. "Dynamics of Consumer Responses to Medical Price Changes," American Economic Review: Insights, American Economic Association, vol. 7(4), pages 534-549, December.
    • Handle: RePEc:aea:aerins:v:7:y:2025:i:4:p:534-49
    DOI: 10.1257/aeri.20240228
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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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