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.
D. LONG-TERM CARE SERVICES
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