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

Angélique Acquatella

No 23-1477, TSE Working Papers from Toulouse School of Economics (TSE)

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)
JEL-codes: D11 I12 I14 (search for similar items in EconPapers)
Date: 2023-10-03
New Economics Papers: this item is included in nep-hea and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:128561

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