The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments
- (pp. 175-90)
Abstract
Insurance is typically viewed as a mechanism for transferring resources from good to bad states. However, insurance may also transfer resources from high-liquidity periods to low-liquidity periods. We test for this type of transfer from health insurance by studying the distribution of Social Security checks among Medicare recipients. When Social Security checks are distributed, prescription fills increase by 6–12 percent among recipients who pay small copayments. We find no such pattern among recipients who face no copayments. The results demonstrate that more complete insurance allows recipients to consume healthcare when they need it rather than only when they have cash.Citation
Gross, Tal, Timothy J. Layton, and Daniel Prinz. 2022. "The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments." American Economic Review: Insights, 4 (2): 175-90. DOI: 10.1257/aeri.20200830Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- G22 Insurance; Insurance Companies; Actuarial Studies
- H55 Social Security and Public Pensions
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology