The Demand Elasticity of Health Care Spending for Low-Income Individuals

Angélique Acquatella
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Angélique Acquatella: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Low-income individuals are typically the most price sensitive segment of the mar-ket, but this is not true in the market for health care services. I show that low-income individuals have a smaller demand elasticity of medical spending with re-spect to coinsurance, relative to their higher income counterparts, using data from the RAND Health Insurance experiment. The null effect is driven by disproportion-ate share of low-income individuals who consume zero health care. The key insight is that low-income individuals may optimally consume zero health care because, when marginal utility of consumption is high, forgoing non-medical consumption becomes very costly.

Keywords: Income effects; Health care demand elasticity; Corner solution (search for similar items in EconPapers)
Date: 2025-02-24
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