demand for another. In general, the cross-price elasticity is negative for substitutes and positive
Compared to the literature estimating own-price elasticity, fewer studies have estimated
cross-price elasticity for either health insurance or health care services. Most of these studies
address the demand for specific types of medical services such as nursing home care (with
respect to the price of substitutes, such as home care or adult foster care) or orthodontic services
(with respect to the price of complementary basic dental care).
Some studies consider “switching” behavior among private health insurance plans with
comparable benefits, but they typically examine only the probability of switching out of a plan in
response to an increase in the plan’s own price. Consequently, we include these studies in the
discussion of own-price elasticity.
The income elasticity of demand measures consumer response to a change in their level of
estimates of income elasticity are observational, the income elasticity of demand for either health
insurance or health care services is measured as differences in demand attributable to differences
(not changes) in income. In general, products that are considered necessities—such as health
care—are income-inelastic; that is, demand for the product is relatively stable, despite
differences in income. In contrast, the demand for discretionary services (e.g., some cosmetic
elasticity of demand for either health insurance or health care services.
B. FACTORS THAT CONTRIBUTE TO VARIATION IN ELASTICITY ESTIMATES
The literature measuring the elasticity of demand for health insurance and health care
services is voluminous. It offers a confusing array of estimates for policymakers seeking to 6