A theoretical analysis of the impact of national health insurance on consumer behavior in the health care market

Abstract

This study analyzes the effects of alternative forms of national health insurance on an individual's demand for health care, referring to both medical care and nonmedical goods and services which may have an effect on the individual's health status. The actual proposals for NHI that have been introduced in the U.S. Congress are briefly examined and classified according to their basic approach. From these proposals, four prototypical plans are specified for analysis. These plans differ according to their benefit structure and the method used to finance them, ranging from a catastrophic protection plan to a full coverage plan that is comprehensive in its coverage. The theory that is developed to analyze each NHI plan is an intertemporal utility maximization model which is specifically formulated to include health insurance as a mechanism of financing medical expenditures. The theory includes time in the consumer's budget constraint as part of the full price of medical care. The individual is viewed as being able to effectively choose the amount of sick time he will experience during any given period through his consumption decision with respect to health care. Both preventative and curative health care are considered to be part of the decision affecting current sick time. ...