Dynamics of Consumer Responses to Medical Price Changes
2025-11-25
How individuals respond to coinsurance rates is fundamental for insurance market design, but most existing estimates speak only to short-run responses. We exploit a unique policy experiment that increased the coinsurance rate some elderly individuals face when they are aged 70–74 but not before or after. Higher coinsurance rates have an immediate and persistent effect on health care expenditure, and a sizable share of this effect persists after age 75. We find no evidence that higher coinsurance rates affect health. These results suggest that health care utilization depends on dynamic factors other than health stock, such as habits. (JEL D12, G22, H51, I11, I12, I13, J14)