The Rand Health Insurance Experiment, Three Decades Later

43 Pages Posted: 22 Dec 2012

See all articles by Aviva Aron-Dine

Aviva Aron-Dine

affiliation not provided to SSRN

Liran Einav

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2012

Abstract

We re-present and re-examine the analysis from the famous RAND Health Insurance Experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending. We begin by summarizing the experiment and its core findings in a manner that would be standard in the current age. We then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms. Finally, we re-consider the famous RAND estimate that the elasticity of medical spending with respect to its out-of-pocket price is -0.2, emphasizing the challenges associated with summarizing the experimental treatment effects from non-linear health insurance contracts using a single price elasticity.

Suggested Citation

Aron-Dine, Aviva and Einav, Liran and Finkelstein, Amy, The Rand Health Insurance Experiment, Three Decades Later (December 2012). NBER Working Paper No. w18642. Available at SSRN: https://ssrn.com/abstract=2192815

Aviva Aron-Dine (Contact Author)

affiliation not provided to SSRN

Liran Einav

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-723-3704 (Phone)
928-223-4973 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-588-0361 (Phone)
617-868-7242 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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