ABSTRACT
This chapter helps to understand the distinction between a model and evidence. It also helps to understand how specific variables affect demand for medical care. A number of economists have estimated demand curves for various types of medical care in various settings using various types of data available in the literature or collected for the purpose. The estimated price elasticity of demand found in these studies varies by an order of magnitude. In the mid-1970s the federal government launched a randomized controlled trial (RCT) of health insurance to learn more about how insurance affects demand for care; conducted by the RAND Corporation; it was called the Health Insurance Study (HIS). The HIS was designed to show whether hospital and ambulatory care are complements to one another or substitutes. The HIS data also show demand elasticities for other services, including dental care, mental health care, and emergency room care.
