• The demand for health care appears to be somewhat elastic….in economic terms. We economists define a good or service as elastic when the quantity demanded changes with a change in the price.

This is happening to demand for Lasik surgery, a topic covered in the 24 April 08 New York Times.

Data demonstrating the phenomenon of the elasticity of demand in health care comes from a fascinating, short poll conducted by QualityHealth, called the Health Opin III Survey. QualityHealth is a consumer health portal which is part of the larger company, MTS, which does interactive marketing.

Overall, 73% of Americans say they are taking preventative measures to remain healthy. Among these, the most popular self-health measures are:

  • Eating healthier, with 60% of people saying they do so;
  • Taking vitamins, done by 48% of people;
  • Exercising more, by 46% of people; and,
  • Visiting the doctor more, done by 25% of people.

While these are all useful tactics for managing health on a daily basis, nearly one-half of Americans (48%) say that given the current economy, they feel they have to cut back on the amount they spend on health care.

The table shown above lists the areas where people expect they will cut back — going to the doctor, visiting the dentist, and filling prescriptions.

Of particular concern to me is the number of people saying a family member has been laid off in the past year — 20%, or 1 in 5. This doesn’t mesh necessarily with the unemployment labor statistics coming out of the Bush administration, but it’s possible that survey respondents’ defined “family member” quite broadly, to include the broadest extent of “extended family.”

Now, for some methodological caveats to the data. This survey polled over 10,000 adults over 18, so it is a large base of respondents. The survey was fielded between March 29 and April 3, 2008. Note that nearly 9 in 10 survey respondents were women (I don’t know why this was the case, but it will surely skew the data in some way). The age cohorts weigh more heavily to younger people — most respondents were between 35 and 64 years of age. People over 65 aren’t hardly represented; that’s the age group that uses more health care services than any other. However, since this population is generally covered by Medicare, health care is paid for by generous Uncle Sam (that would be the American taxpayers). Thus, the issue of elasticity of demand isn’t as germane…at least until Medicare levies more out-of-pocket costs onto enrollees.

Health Populi’s Hot Points: We can’t be naive to the relationship between health care cost increases and individual demand for health services when they are paid out-of-pocket. Proponents of the consumer-directed health movement have often pointed to Lasik surgery as the stellar example for such plans. However, the New York Times writes that we are headed for a “Lasik recession.” The declining demand — that is, consumers’ willingness to pay — for other procedures include Botox, skin treatments, and breast implants. So much for demand for elective procedures with good price transparency. What will happen with peoples’ willingness-to-pay for “must-have” health services such as visiting physicians for preventive or early-stage care, or needed prescription drugs? The QualityHealth survey tells us to expect the elasticity of demand to kick in for more necessary care, as well.

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