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Health insurance and the demand for medical care: Instrumental variable estimates using health insurer claims data

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  • Dunn, Abe

Abstract

This paper takes a different approach to estimating demand for medical care that uses the negotiated prices between insurers and providers as an instrument. The instrument is viewed as a textbook “cost shifting” instrument that impacts plan offerings, but is unobserved by consumers. The paper finds a price elasticity of demand of around −0.20, matching the elasticity found in the RAND Health Insurance Experiment. The paper also studies within-market variation in demand for prescription drugs and other medical care services and obtains comparable price elasticity estimates.

Suggested Citation

  • Dunn, Abe, 2016. "Health insurance and the demand for medical care: Instrumental variable estimates using health insurer claims data," Journal of Health Economics, Elsevier, vol. 48(C), pages 74-88.
    • Handle: RePEc:eee:jhecon:v:48:y:2016:i:c:p:74-88
    DOI: 10.1016/j.jhealeco.2016.03.001
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    Cited by:

    1. Ahmad Reshad Osmani & Albert Okunade, 2021. "A Double-Hurdle Model of Healthcare Expenditures across Income Quintiles and Family Size: New Insights from a Household Survey," JRFM, MDPI, vol. 14(6), pages 1-21, May.
    2. Anne E. Hall, 2015. "Regional Patterns in Medical Technology Utilization," BEA Working Papers 0126, Bureau of Economic Analysis.
    3. Mikko Nurminen, 2021. "Mergers and Acquisitions in the Markets for Diagnostic Services: Evidence from the Finnish Private Health Care Sector," Discussion Papers 139, Aboa Centre for Economics.
    4. Gabriela Mihaela MUREÅžAN, 2023. "Ï»¿Bibliometric Analysis Of Health Insurance," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(25), pages 1-9.
    5. Dunn, Abe & Shapiro, Adam Hale & Liebman, Eli, 2013. "Geographic variation in commercial medical-care expenditures: A framework for decomposing price and utilization," Journal of Health Economics, Elsevier, vol. 32(6), pages 1153-1165.
    6. Huan Liu & Weidong Dai, 2020. "An Empirical Study on the Benefits Equity of the Medical Security Policy: the China Health and Nutrition Survey (CHNS)," IJERPH, MDPI, vol. 17(4), pages 1-17, February.
    7. Ghosh, Ausmita & Simon, Kosali & Sommers, Benjamin D., 2019. "The Effect of Health Insurance on Prescription Drug Use Among Low-Income Adults:Evidence from Recent Medicaid Expansions," Journal of Health Economics, Elsevier, vol. 63(C), pages 64-80.
    8. Hong Liu & Xiaobo Peng & Hui Xiang, 2025. "Expenditure response to patient cost-sharing: evidence from China’s New Cooperative Medical Scheme," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(2), pages 1-34, June.
    9. Dillender, Marcus, 2018. "What happens when the insurer can say no? Assessing prior authorization as a tool to prevent high-risk prescriptions and to lower costs," Journal of Public Economics, Elsevier, vol. 165(C), pages 170-200.
    10. He, Wen, 2023. "Social medical insurance integration and health care disparities in China: Evidence from an administrative claim dataset," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 20-39.
    11. Anderson, David M. & Hoagland, Alex & Zhu, Ed, 2024. "Medical bill shock and imperfect moral hazard," Journal of Public Economics, Elsevier, vol. 236(C).

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    Keywords

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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