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Compared to other services, the price elasticity of demand for dental services appears to be

greater in the short run than in the long run. Analysis of HIE data indicated that price effects in

the first year of coverage were twice as large as in the second year (Manning et al. 1985).

Similar to other types of acute care, cost sharing tended to affect the decision to seek treatment

much more than the expenditure once treatment was sought.


Together with longer life expectancy, the aging of the baby-boom generation is expected to

greatly increase the demand for long-term care services. While research on the factors that affect

the demand for long-term care is sparse, it suggests that the demand for these services is much

more price sensitive than that for other types of health care.

Using 1989 National Long Term Care Survey data, Reschovsky (1998) estimated a price

elasticity of –0.98 with respect to nursing home use among private payers. However, some

consumers—those who lacked informal care resources from families and communities and those

who had greater levels of disability—were much less price sensitive. Specifically, the price

elasticity among those who were married was –2.40 (more than twice the average elasticity

among all survey respondents), but it was –0.53 among those who were unmarried. However,

most of Reschovsky’s price elasticity estimates were not statistically significant at the

conventional levels and therefore must be interpreted with caution.

A more recent study of price elasticity used 1991 cross-sectional data from for-profit nursing

homes in the state of New York (Mukamel and Spector 2002). After imputing the marginal cost

of care from facility-level data, this study concluded that the average elasticity with respect to

changes in the marginal cost of care ranged from –3.46 to –3.85—implying that a 10 percent

decrease in price would raise demand (for a given facility) by nearly 35 percent. Because they

were derived as facility-specific elasticities, these estimates should be used with caution: they


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