Econ+157+Topic+C+Demand+for+Health

# Econ+157+Topic+C+Demand+for+Health - Topic C EMPIRICAL...

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EMPIRICAL ANALYSIS OF DEMAND FOR HEALTH CARE AND GROSSMAN MODEL Topic C 2/24/2010 Econ 157 Mortimer 1

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Estimating Health Care Demand Econ 157 Mortimer Overview Why do we estimate demand? We can implement better health care policy if we know: Price and income elasticities How various factors (e.g., demographic characteristics) affect demand for health care How do we measure demand? Find a mathematical relationship between Q, P, and other demand shifters using econometrics E.g., individual demand for office visits V = f (price per visit, price of other goods, income, health status, age, education, …. etc.) 2/24/2010 2
Estimating Health Care Demand Econ 157 Mortimer Overview Issues to consider in demand estimation Functional form Linear: Q = a + b 1 P + b 2 (income) + b 3 (gender) + b 4 (region) + … Log-log: logQ = a + b 1 logP + b 2 log(income) + …. . Units of demand Expenditures – but these include both Q and P and are affected by quality # of visits, patient days (e.g., # of patients x days of hospitalization) , # of cases treated, # of admissions, # of discharges Price Per unit of service Billing rates, reimbursement rates, patients’ pay 2/24/2010 3

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Estimating Health Care Demand Econ 157 Mortimer Overview Issues to consider in demand estimation Data sources Claims data from payers Surveys (e.g., NMES, MEPS) Types of data Nonexperimental data are common » we cannot control the environment so various factors may be changing simultaneously Natural experiment is useful » It measure the impact of some exogenous changes Elasticity estimates from different studies can vary significantly 2/24/2010 4
Price Elasticities Econ 157 Mortimer Q P P Q Ep Generally we expect: market-level elasticity < firm-level elasticity Individual or market level demand for health care services (e.g., expenditures, physician visits, hospital admissions) Firm level demand for health care services (e.g., physician visits, hospital patient days)

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## Econ+157+Topic+C+Demand+for+Health - Topic C EMPIRICAL...

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