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the HIE did not envision the emergence of many important influences on health care costs and

coverage—such as varied cost sharing for different medical services in health insurance plans

(e.g., lower cost sharing for preventive care and tiered formularies for prescription drugs), the

use of managed care techniques, and many other aspects of benefit design and management that

are common today.

In addition, there is no single reference point of elasticity estimates (like the ones measured

in the HIE) with respect to the demand for health insurance, either by employers, employees, or

individuals in the nongroup market. The range of elasticity estimates in the research literature

appears to support the notion that there is wide variation the estimated response to public policy

proposals that would alter the price of insurance to encourage greater coverage.

The Office of the Assistant Secretary for Planning and Evaluation (ASPE) is concerned

whether the HIE estimates or subsequent estimates of price and income elasticity accurately

reflect today’s health insurance and health care markets, and therefore are adequate to support

the development of public policy. A critical review of the research literature on consumer

responsiveness to the price of health insurance and services is an essential first step in appraising

this concern.

This report reviews estimates of the price and income elasticities of demand for health

insurance and health care services in the research literature. The number of studies that have

estimated the elasticity of demand for health insurance and services products is very large. In

order to produce a manageable review, we restricted the studies included in this report using

three criteria:

  • The study produced estimates of the price or income elasticity of demand for health insurance and/or the demand for health care services, or it generated other estimates that are useful in understanding the responsiveness of demand to changes in price or income.

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