What Drives Differences in Health Care Demand? The Role of Health Insurance and Selection Bias
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%).
|Date of creation:||Jun 2012|
|Date of revision:|
|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
Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/
More information through EDIRC
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.:
- Helen Levy & David R. Weir, 2010.
"Take-up of Medicare Part D: Results From the Health and Retirement Study,"
Journals of Gerontology: Series B,
Gerontological Society of America, vol. 65(4), pages 492-501.
- Helen Levy & David Weir, 2009. "Take-Up of Medicare Part D: Results from the Health and Retirement Study," NBER Working Papers 14692, National Bureau of Economic Research, Inc.
- de Meza, David & Webb, David C, 2001.
"Advantageous Selection in Insurance Markets,"
RAND Journal of Economics,
The RAND Corporation, vol. 32(2), pages 249-62, Summer.
- 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.
- Amy Finkelstein & Sarah Taubman & Bill Wright & Mira Bernstein & Jonathan Gruber & Joseph P. Newhouse & Heidi Allen & Katherine Baicker & The Oregon Health Study Group, 2011.
"The Oregon Health Insurance Experiment: Evidence from the First Year,"
NBER Working Papers
17190, National Bureau of Economic Research, Inc.
- 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.
- Finkelstein, Amy, et al., 2011. "The Oregon Health Insurance Experiment: Evidence from the First Year," Working Paper Series rwp11-040, Harvard University, John F. Kennedy School of Government.
- Meer, Jonathan & Rosen, Harvey S., 2004.
"Insurance and the utilization of medical services,"
Social Science & Medicine,
Elsevier, vol. 58(9), pages 1623-1632, May.
- 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.
- 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.
- Fang, Hanming & Keane, Michael & Silverman, Dan, 2006.
"Sources of Advantageous Selection: Evidence from the Medigap Insurance Market,"
17, Yale University, Department of Economics.
- Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 303-350, 04.
- Hanming Fang & Michael P. Keane & Dan Silverman, 2006. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," NBER Working Papers 12289, National Bureau of Economic Research, Inc.
- 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.
- Michael Anderson & Carlos Dobkin & Tal Gross, 2010. "The Effect of Health Insurance Coverage on the Use of Medical Services," NBER Working Papers 15823, National Bureau of Economic Research, Inc.
- 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.
- 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.
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 references are entirely missing, you can add them using this form.