How does family health care use respond to economic shocks? realized and anticipated effects

Using two-year panel data from the Medical Expenditure Panel Survey (MEPS) for 2004 to 2012, we examine how the intra-family allocation of health care spending responds to realized and anticipated changes in family economic status. We focus on the share of total family health care spending allocated to children, and measure realized economic shocks based on changes in the family’s income, employment, and health insurance status. We account for anticipated economic shocks through changes in macroeconomic indicators and time periods associated with the Great Recession. Using families as the unit of observation, we apply fractional response models with correlated random effects and two-part health expenditure models to assess how over a two-year period, family health care spending responds to economic shocks. Our findings indicate that income shocks to single-mother families result in an increase in the share of family health care spending consumed by children, while in two-parent families, economic shocks have little impact on the allocation of health spending between parents and children. Our findings for single-mother families are consistent with altruistic behavior by parents toward children.