Implications of the Interaction between Insurance Choice and Medical Care Demand

16 Pages Posted: 8 Feb 2010

See all articles by Richard Dusansky

Richard Dusansky

University of Texas at Austin

Çağatay Koç

affiliation not provided to SSRN

Abstract

The gross price elasticity of demand for medical care is decomposed into two separate observable components: the medical care gross price elasticity of insurance choice and the cost-sharing elasticity of medical care. When consumers alter their choice of health-care plans, the price elasticity of medical care is no longer equivalent to the cost-sharing elasticity; using the latter as a proxy for the former may produce misleading results. We present conditions under which the medical care price elasticity is positive, the case of a quasi-Giffen good, and provide a theoretical foundation for extant empirical findings of a positive medical care price elasticity of insurance demand.

Suggested Citation

Dusansky, Richard and Koç, Çağatay, Implications of the Interaction between Insurance Choice and Medical Care Demand. Journal of Risk and Insurance, Vol. 77, Issue 1, pp. 129-144, March 2010, Available at SSRN: https://ssrn.com/abstract=1548163 or http://dx.doi.org/10.1111/j.1539-6975.2009.01335.x

Richard Dusansky (Contact Author)

University of Texas at Austin ( email )

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Çağatay Koç

affiliation not provided to SSRN

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