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random assignment design) as well as the scope of services that it considered. Each of the

following sections compares more recent estimates of price elasticity to those produced by the

HIE.

A. OVERALL HEALTH SERVICES

A number of studies have attempted to estimate the demand for all health care services in

the aggregate. These studies skirt various thorny issues for estimating demand, including the

difficulty of observing the prices of specific services and the range of available service or

treatment options. Taking a more generalized approach, they investigate consumer response to a

change in out-of-pocket cost in terms of the change in their total health care bill.

1.

Range of Estimates

Evidence from studies on price elasticity of overall health services consistently suggests that

the demand for health care (like health insurance) is price-inelastic. These estimates typically

range

from

  • 0.04

to

  • 0.75,

but

generally

center

around

  • 0.2.

That

is,

they

indicate

that

consumers reduce their total health care expenditures for care by 2 percent in response to a 10

percent increase in its price. These studies vary widely in the both the types of data and the

measures of price that they use, but researchers have generally attributed price-induced changes

in demand in large part to changes in the probability of accessing any care, not changes in the

amount of care used once care is accessed (Ringel et al. 2002).

A series of analyses analyzing data from the HIE compared the use of health care by

individuals who faced different combinations of deductibles, coinsurance rates, and out-of-

pocket maximums (Manning et al. 1987; Newhouse et al. 1993). These analyses concluded that

people with higher deductibles reduced their use of health care, and higher coinsurance rates

34

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