The Demand for Health Insurance

(1) The Demand for Health Insurance
(2) The Effect of Health Insurance on Demand for Medical Care
Lesson Objectives:
(1) To understand the following concepts related to the demand for health insurance:
expected utility, marginal utility of wealth, and risk aversion.
(2) To define what is meant by an “actuarially fair premium.”
(3) To define and to graphically illustrate what is meant by moral hazard within the
context of demand for medical care.
(4) To summarize the empirical evidence of the relationship between benefit design,
including cost-sharing provisions such as coinsurance and deductibles, on the
demand for medical care.
Manning, Willard G., Joseph P. Newhouse, Naihua Duan, Emmett B. Keeler, and Arleen
Leibowitz. 1987. “Health Insurance and the Demand for Medical Care: Evidence from a
Randomized Experiment.” American Economic Review, 77(3): 251–77.
Finkelstein et al., “The Oregon Health Insurance Experiment: Evidence from the First
Year.” NBER Working Paper, 2012.
*Brent, R., Asplin et al. “Insurance Status and Access to Urgent Ambulatory Care Followup Appointments,” JAMA 2005: 294: 1248-1254.
*Rector, T., M. Finch, P. Danzon, M. Pauly, and B. Manda. “Effect of Tiered Prescription
Copayments on the Use of Preferred Brand Medications.” Medical Care, 41(3): 398-406.
Supplemental Resources:
Parente, S., R. Feldman, J. Christianson. “Evaluation of the Effect of a Consumer-Driven
Health Plan on Medical Care Expenditures and Utilization” Health Services Research,
2004, 39(4): Part II, 1189-1210.
Baker, Bundorf, and Royalty. “Consumer-Oriented Strategies for Improving Health Benefit
Design.” AHRQ Technical Review. Accessed at:
Swartz, Katherine. “Cost-sharing: Effects on Spending on Outcomes.” Robert Wood
Johnson Foundation Synthesis, December 2010.
Gruber, J. “The Role of Consumer Copayments for Health Care: Lessons from the RAND
Health Insurance Experiment and Beyond.” Kaiser Family Foundation, October 2006.
Buntin, M., C. Damberg, A. Haviland, K. Kapur, N. Luri, R. McDevitt, M.S. Marquis.
“Consumer-Directed Health Care: Early Evidence About Effects On Cost And Quality,”
Health Affairs, 25, no.6 (2006):w516-w530.
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