Does insurance increase or decrease the demand for medical care? Does this represent a problem for...

Does insurance increase or decrease the demand for medical care? Does this represent a problem for any parties involved in health care? Why? Research the current trend of insurance since the inception of the Affordable Care Act. How might the change in policy effect the demand for healthcare moving forward?

Expert Solution

We estimate the causal impact of having health insurance on healthcare expenditures. We take advantage of a unique quasi-experimental setup in which deductibles and co-payments were zero in a managed care plan and nonzero in regular insurance, until a policy change forced all individuals with an active plan to cover a minimum amount of their expenses. Using panel data and a nonlinear difference-in-differences strategy, we find a demand elasticity of about -0.14 comparing full insurance with the cost-sharing model and a significant upward shift in the likelihood to generate costs.

Rahul Sunny answered 3 years ago

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