The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments

Gross, Tal; Layton, Timothy J.; Prinz, Dániel

doi:10.1257/aeri.20200830

Cited by 20 publications

(17 citation statements)

References 64 publications

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“…The welfare gains from such contracts potentially extend beyond smoothing consumption over medical expense shocks to health improvements produced by more affordable healthcare. This inference is supported by US evidence that more comprehensive, subsidized health insurance weakens the extent to which the utilization of medicines is sensitivity to the liquidity of low-income households (Gross et al, 2022). Liquidity constraints are barriers to both healthcare consumption and health insurance.…”

Section: Discussionmentioning

confidence: 93%

Do time preferences explain low health insurance take‐up?

Baillon

O’Donnell

Quimbo

et al. 2022

J of Risk & Insurance

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Low insurance take-up in low-income populations is not easily explained by the standard single-period expected utility model of insurance that overlooks the relevance of time preference when liquidity is constrained. We design field survey instruments to elicit quasi-hyperbolic time preferences, as well as prospect theory risk preferences, and use them to examine whether time preferences explain health insurance behavior of lowincome Filipinos. Consistent with theory, those with stronger parameterized time preference are less likely to insure and the partial association is most pronounced at low wealth where liquidity is most likely to be constrained. Among those with better understanding of insurance, lower take-up is also associated with present bias. We do not find that insurance is significantly associated with risk preferences.

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Section: Discussionmentioning

confidence: 93%

Do time preferences explain low health insurance take‐up?

Baillon

O’Donnell

Quimbo

et al. 2022

J of Risk & Insurance

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show abstract

“…Previous research has pointed out that individuals delayed healthcare because they were unable to pay small co-payments, of 2 US$ to 5 US$ (Gross et al, 2022). We focus on public hospitalizations, in which case individuals do not have to incur in any monetary costs.…”

Section: Exogenous Covariatesmentioning

confidence: 99%

“…We contribute to three strands of literature. First, we contribute to the very recent literature that documents similar "liquidity sensitivity" in health care consumption (Gross et al, 2022;Lyngse, 2020). We add to it by documenting changes in another measure of healthcare consumption, other than prescription drugs.…”

mentioning

confidence: 98%

Liquidity constraints, cash transfers and the demand for health care in the Covid‐19 pandemic

Dória

Gomes

2022

Health Economics

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In the last decade, we observed four pandemics emerge throughout the world, which posed considerable risk to individuals and substantial challenges to governments. In this paper, we examine the existence of "liquidity sensitivity" behavior in the most recent pandemic (COVID-19), that is, whether sick individuals delay healthcare consumption due to lack of income and access to credit markets.Consider, for instance, an informal worker who depends on their daily earnings to provide for their family. Even if they are infected, the lack of income might prevent them from searching the healthcare system. This behavior might not only aggravate the individuals' disease but also increase the probability of them infecting others.We evaluate this hypothesis in the context of the Emergency Aid (EA) program in Brazil, a large cash transfer program undertaken during the COVID-19 pandemic. We evaluate if the program, that increased beneficiaries' liquidity, affected their healthcare consumption either by increasing COVID-19-related hospitalizations or decreasing the lag between becoming ill and accessing the healthcare system.To test this hypothesis, we take advantage of the fact that different birth cohorts received the transfer on different days and that the transfer should increase beneficiaries' healthcare consumption immediately if they are liquidity constrained. We exploit these factors by implementing a regression discontinuity in time (RDiT) design.

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“…10 An extensive literature demonstrates that low-income individuals are sensitive to out-of-pocket drug costs, reducing their use of prescription drugs to a greater extent than higher-income individuals when out-of-pocket costs rise. 6,[11][12][13] Financial barriers to medication use are of particular concern to the Medicare program because one-third of Medicare beneficiaries have household incomes ≤150% of the Federal Poverty Level (FPL), 14 and because Medicare Part D requires substantial enrollee cost-sharing. Specifically, Part D enrollees face an initial deductible ($480 in 2022) and incur cost-sharing (either 25% coinsurance or co-payments 15 ) until they reach the program's catastrophic coverage threshold ($10,690 in total drug spending in 2022).…”

Section: Introductionmentioning

confidence: 99%

“…An extensive literature demonstrates that low‐income individuals are sensitive to out‐of‐pocket drug costs, reducing their use of prescription drugs to a greater extent than higher‐income individuals when out‐of‐pocket costs rise 6,11–13 . Financial barriers to medication use are of particular concern to the Medicare program because one‐third of Medicare beneficiaries have household incomes ≤150% of the Federal Poverty Level (FPL), 14 and because Medicare Part D requires substantial enrollee cost‐sharing.…”

Section: Introductionmentioning

confidence: 99%

Consequences of forgoing prescription drug subsidies among low‐income Medicare beneficiaries with diabetes

Glynn

Hernandez

Roberts

2022

Health Services Research

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Objective The objective is to estimate the take‐up of the Medicare Part D Low‐Income Subsidy (LIS) among Medicare beneficiaries with diabetes and examine differences in out‐of‐pocket costs and prescription drug use between LIS enrollees and LIS‐eligible non‐enrollees. The LIS reduces out‐of‐pocket drug costs for low‐income beneficiaries; however, not all LIS‐eligible individuals are enrolled. Take‐up of the LIS, and consequences of forgoing this benefit among beneficiaries with diabetes, remains unknown. Data Sources Health and Retirement Study linked to Medicare administrative data from 2008 to 2016. Study Design We conducted two analyses among beneficiaries with diabetes. First, we estimated LIS take‐up stratified by income (≤100% of the Federal Poverty Level [FPL] and >100% to ≤150% of FPL). Second, to assess the consequences of forgoing the LIS among near‐poor beneficiaries (incomes >100% to ≤150% of FPL), we conducted propensity score‐weighted regression analyses to compare out‐of‐pocket costs, the prescription drug use, and cost‐related medication non‐adherence among LIS enrollees and LIS‐eligible non‐enrollees. Data Collection/Data Extraction N/A. Principal Findings Among Medicare beneficiaries with diabetes, 68.1% of those with incomes >100% to ≤150% of FPL received the LIS, while 90.3% with incomes ≤100% of FPL received the LIS. Among near‐poor beneficiaries, LIS‐eligible non‐enrollees incurred higher annual out‐of‐pocket drug spending ($518; 95 [in USD]% CI: $370 [in USD], $667 [in USD]; p < 0.001), filled 7.3 fewer prescriptions for diabetes, hypertension, and hyperlipidemia drugs (95% CI: −11.1, −3.5; p < 0.001), and were 8.9 percentage points more likely to report skipping drugs due to cost (95% CI: 0.3, 18.0; p = 0.04), all compared to LIS enrollees. Conclusions Despite providing substantial financial assistance with prescription drug costs, the LIS is under‐utilized among beneficiaries with chronic conditions requiring routine medication use. As policy makers discuss Part D reforms to address rising out‐of‐pocket drug costs, they should consider strategies to increase participation in existing programs that alleviate cost burdens among low‐income Medicare beneficiaries.

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The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments

Cited by 20 publications

References 64 publications

Do time preferences explain low health insurance take‐up?

Do time preferences explain low health insurance take‐up?

Liquidity constraints, cash transfers and the demand for health care in the Covid‐19 pandemic

Consequences of forgoing prescription drug subsidies among low‐income Medicare beneficiaries with diabetes

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