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Estimating the Distribution of Elasticities of Medical Expenditures Using a Notch in Out-of-Pocket Cost

Date: Wednesday, Jun 5, 2024, 16:30 ~ 17:45
Speaker: Hae-young Hong (SNU)
Location: 우석경제관(223동) 308호
◈ 주   제 : Estimating the Distribution of Elasticities of Medical Expenditures Using a Notch in Out-of-Pocket Cost
◈ 발표자 : Hae-young Hong (SNU)
◈ 일   시 : 2024년 6월 5일 수요일 16:30 ~ 17:45
◈ 장   소 : 우석경제관(223동) 308호
◈ 주   관 : 경제학부, 경제연구소 한국경제혁신센터, SSK, BK21

Estimating the Distribution of Elasticities of Medical Expenditures Using a Notch in Out-of-Pocket Cost

 

Abstract:

This paper develops a novel method for estimating the distribution of elasticities of medical expenditures with respect to out-of-pocket costs, leveraging patient responses at a notch in South Korea. Using a natural experiment that exploits differences in the out-of-pocket costs for 64- and 65-year-olds within the same calendar year, a strategy is developed to characterize the conditional cumulative distribution of elasticities given medical expenditures as a function of observable variables. A copula approach is employed to account for the dependence between elasticities and medical expenditures. Using Korean health insurance administrative data from 2013-2017, this study finds the upper bound of the elasticities is 0.17 and the mean is 0.1. Counterfactual policy simulations show that introducing a linear coinsurance rate of 21.3% instead of a notch can improve the welfare of patients and clinics without increasing the insurer's spending.

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