Implications of the Interaction Between Insurance Choice and Medical Care Demand |
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| Authors: | Richard Dusansky,Ç a&# atay Koç |
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| Affiliation: | Richard Dusansky is with the Department of Economics, University of Texas at Austin. Çağatay Koçis with the Department of Economics, University of Texas at Arlington. Dusansky can be contacted via e-mail: |
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| 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. |
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