Health care demand elasticities by type of service

•We estimate within-year demand elasticities for 26 health care service categories.•We analyze 171 million person-months from 73 large employers from 2008-14.•Overall demand elasticity using backward myopic spot prices is -0.44.•Elasticities vary substantially from -0.02 for prevention to -0.44 for...

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Bibliographic Details
Published in:Journal of health economics Vol. 55; pp. 232 - 243
Main Authors: Ellis, Randall P., Martins, Bruno, Zhu, Wenjia
Format: Journal Article
Language:English
Published: Netherlands Elsevier B.V 01.09.2017
Elsevier Sequoia S.A
Subjects:
Adolescent
Adult
Child
Child, Preschool
Children
Companies
Consumers
Cost sharing
Cost Sharing - statistics & numerical data
Demand
Drug abuse
Dynamic demand for health care
Elasticity
Elasticity of demand
Emergency medical care
Emergency medical services
Emergency response
Employers
Health Benefit Plans, Employee - economics
Health Benefit Plans, Employee - statistics & numerical data
Health care
Health care industry
Health economics
Health Expenditures - statistics & numerical data
Health services
Health Services - statistics & numerical data
Health Services Needs and Demand - economics
Health Services Needs and Demand - statistics & numerical data
High deductible health plans
Humans
Infant, Newborn
Mental health
Mental health services
Middle Aged
Myopic expectations
Prescription drugs
Price elasticity
Prices
Specialists
Specification
Substance abuse
United States
Young Adult
C21
D12
Cost sharing
I11
Elasticity
High deductible health plans
Dynamic demand for health care
Myopic expectations
ISSN:0167-6296, 1879-1646, 1879-1646
Online Access:Get full text
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Summary:•We estimate within-year demand elasticities for 26 health care service categories.•We analyze 171 million person-months from 73 large employers from 2008-14.•Overall demand elasticity using backward myopic spot prices is -0.44.•Elasticities vary substantially from -0.02 for prevention to -0.44 for pharmacy.•Demand is less elastic for children, hourly nonunion workers, and sicker people. We estimate within-year price elasticities of demand for detailed health care services using an instrumental variable strategy, in which individual monthly cost shares are instrumented by employer-year-plan-month average cost shares. A specification using backward myopic prices gives more plausible and stable results than using forward myopic prices. Using 171 million person-months spanning 73 employers from 2008 to 2014, we estimate that the overall demand elasticity by backward myopic consumers is −0.44, with higher elasticities of demand for pharmaceuticals (−0.44), specialists visits (−0.32), MRIs (−0.29) and mental health/substance abuse (−0.26), and lower elasticities for prevention visits (−0.02) and emergency rooms (−0.04). Demand response is lower for children, in larger firms, among hourly waged employees, and for sicker people. Overall the method appears promising for estimating elasticities for highly disaggregated services although the approach does not work well on services that are very expensive or persistent.
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ISSN:0167-6296
1879-1646
1879-1646
DOI:10.1016/j.jhealeco.2017.07.007