THE DYNAMICS OF MEDICAL CARE USE IN THE BRITISH HOUSEHOLD PANEL SURVEY
Article first published online: 12 JUN 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Volume 22, Issue 6, pages 687–710, June 2013
How to Cite
Kohn, J. L. and Liu, J. S. (2013), THE DYNAMICS OF MEDICAL CARE USE IN THE BRITISH HOUSEHOLD PANEL SURVEY. Health Econ., 22: 687–710. doi: 10.1002/hec.2845
- Issue published online: 7 MAY 2013
- Article first published online: 12 JUN 2012
- Manuscript Accepted: 26 APR 2012
- Manuscript Revised: 13 MAR 2012
- Manuscript Received: 18 APR 2011
- medical care demand;
- dynamic models
We explore whether medical care use is persistent over a long panel using 18 waves of the British Household Panel Survey. Of particular interest is high medical care use because a few high users account for a disproportionate amount of use while many individuals use no medical care in a given year. If health is a primary driver of medical care demand, and we control for health, then past medical care use should be uninformative for future use. However, we find that conditional on health, other covariates and unobservable heterogeneity, medical care use remains significantly persistent. “No use” and “high use” are more strongly persistent, and persistence is generally stronger for women, those in poor health, and at older ages. We find that unobservable heterogeneity explains between 10% and 25% of the variation in medical care use. This heterogeneity is significantly correlated with both medical care use and health over our long panel. These findings have implications for the econometric modeling of medical care demand and suggest that policies aimed to reduce aggregate medical care spending by improving health, particularly the health of seniors, may be less effective than projected using static models. Copyright © 2012 John Wiley & Sons, Ltd.