Presents a theory of the demand for medical care services that is a generalization of Michael Grossman's investment model in three ways: Medical care is not treated as a homogeneous commodity but disaggregated to hospital and physician services; the price of the provider selected and medical insurance are treated as endogenous; and variation in price per unit of services among providers is allowed for and explained. Preliminary estimates of price and income elasticities are presented using data on heads of families in the labor force from the 1963 Center for Health Administration Studies survey. These data show price elasticities to be on the order of -0.15 for hospital length of stay and physician visits and wage income elasticities to be near zero.
This report is part of the RAND Corporation Report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.