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. 2013 Winter;27(1):197-222.
doi: 10.1257/jep.27.1.197.

The RAND Health Insurance Experiment, three decades later

Aviva Aron-Dine, Liran Einav  1 , Amy Finkelstein  2
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The RAND Health Insurance Experiment, three decades later

Aviva Aron-Dine et al. J Econ Perspect. 2013 Winter.

Abstract

We re-present and re-examine the analysis from the famous RAND Health Insurance Experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending. We begin by summarizing the experiment and its core findings in a manner that would be standard in the current age. We then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms. Finally, we re-consider the famous RAND estimate that the elasticity of medical spending with respect to its out-of-pocket price is −0.2, emphasizing the challenges associated with summarizing the experimental treatment effects from non-linear health insurance contracts using a single price elasticity.

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Figures

Figure 1
Figure 1
The Price Elasticity of Health Care Utilization
Figure 2
Figure 2
Non-Linear Health Insurance Coverage
See this image and copyright information in PMC

References

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    1. Aron-Dine Aviva, Einav Liran, Finkelstein Amy, Cullen Mark. Moral Hazard in Health Insurance: How Important is Forward Looking Behavior? NBER Working Paper No. 17802 2012
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