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3.

Consideration of Supply-Side Behaviors

Little is known about how insurers or providers might respond to a large change in the price

for coverage or services, such as might occur if a sizeable refundable tax credit for health

insurance were enacted. In such an event, it is reasonable to expect that insurers might change

the nature of insurance products in an attempt to offer “zero premium” plans (net of the

refundable credit) and that providers might alter the cost of seeking care (to attract newly insured

patients or avoid bad debt that may be associated with underinsured patients). Either response

would alter demand.

While including such supply-side behaviors in a structural model can raise methodological

challenges, understanding supply-side behaviors is essential to anticipating the long-term effects

of policy change. At minimum, researchers should consider possible scenarios of supply-side

changes and conduct sensitivity analyses of demand changes in response to these scenarios.

However, at present, there is virtually no basis for selecting among or quantifying possible

scenarios. Even a modest program of research on supply-side responses could be very helpful in

guiding how researchers might consider supply-side effects when modeling policy change.

B. SPECIFIC INSURANCE PRODUCTS, SERVICES, AND SUBPOPULATIONS

Both supply and demand in the health care market are heterogeneous: not only are products

tailored to address different needs, but the population varies widely with respect to attributes that

affect decision-making about health insurance coverage and service use. To be efficient, public

policy initiatives to expand coverage probably will be targeted narrowly to specific

subpopulations. Consequently, for public policy to be effective, it is necessary to anticipate how

target subpopulations will respond. Our assessment of the literature suggests there are a number

of products, services, and subpopulations that may be important targets for public policy but

have not been studied at all or studied adequately.

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