Effects of change in price of medical care on daily living of people in the USA

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Abstract

Objectives

To examine (a) how changes in the price of medical care affected demand for different goods of daily use among people in the USA and (b) how changes in the price of medical care affected demand for basic necessities of life, namely food, housing and medical care for people belonging to different socioeconomic groups.

Methods

This study used out-of-pocket expenditure data from the Consumer Expenditure Survey (CES) and price data from the Consumer Price Index (CPI) during 1996–2005. The unit of analysis for this study was a consumer unit. Ordinary least-square regressions and Tobit regressions were used to perform analysis.

Key findings

Increases in the price of medical care caused a decrease in demand for most commodities used for daily living. As price of medical care increased, demand for medical care also decreased. Demand for medical care was price inelastic (coefficient of price elasticity, 0.72) with low positive income elasticity (0.13). Demand for food, housing and medical care was worst affected for poor people compared to people in middle- and higher-income groups due to the increased price of medical care. Demand for medical care increased across all income and ethnic groups with educational attainment.

Conclusions

Increases in the price of medical care could adversely affect the nutritional and housing status of poor people. If demand for medical care could act as a proxy for access to and availability of medical care, it could be inferred that poor people are most affected by the price increase. This study could prompt policy makers to provide more support to indigent people to improve access to medical care and to ensure adequate nutritional and housing needs.

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