The Economics of Incentive-Based Health Care Plans

Medical savings accounts (MSAs) belong to a larger class of incentive-based health care plans. Using a model that allows the consumer to invest in healthy activities, we examine the efficiency properties of incentive plans and compare them to traditional full- coverage and deductible plans, under both experience rating and community rating. The model also is extended to include utilization of preventive health care. Properly constructed incentive plans have the capacity to induce socially efficient levels of healthy activities and preventive care, raising the expected wealth of consumers without reducing insurers' profits.

The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health

We use data from the National Longitudinal Study of Adolescent Health (Add Health) to examine the effects of classmate characteristics on economic and social outcomes of students. The unique structure of the Add Health allows us to estimate these effects using comparisons across cohorts within schools, and to examine a wider range of outcomes than other studies that have used this identification strategy. This strategy yields variation in cohort composition that is uncorrelated with student observables suggesting that our estimates are not biased by the selection of students into schools or grades based on classmate characteristics. We find that increases in the percent of classmates whose mother is college educated has significant, desirable effects on educational attainment and substance use. We do not find much evidence that the percent of classmates who are black or Hispanic has significant effects on individual outcomes, on average. Additional analyses suggest, however, that an increase in the percent black or Hispanic may increase dropout rates among black students and post-high school idleness among males.

The Aggregate Demand for Private Health Insurance Coverage in the U.S.

This paper estimates the aggregate demand for private health insurance coverage in the U.S. using an error-correction model and by recognizing that people are without private health insurance for voluntary, structural, frictional, and cyclical reasons and because of public alternatives. Insurance coverage is measured both by the percentage of the population enrolled in private health insurance plans and the completeness of the insurance coverage. Annual data for the period 1966-1999 are used and both short and long run price and income elasticities of demand are estimated. The empirical findings indicate that both private insurance enrollment and completeness are relatively inelastic with respect to changes in price and income in the short and long run. Moreover, private health insurance enrollment is found to be inversely related to the poverty rate, particularly in the short-run. Finally, our results suggest that an increase in the number cyclically uninsured generates less of a welfare loss than an increase in the structurally uninsured.