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The European Journal of Health Economics

, Volume 18, Issue 6, pp 773–785 | Cite as

China’s medical savings accounts: an analysis of the price elasticity of demand for health care

Original Paper

Abstract

Although medical savings accounts (MSAs) have drawn intensive attention across the world for their potential in cost control, there is limited evidence of their impact on the demand for health care. This paper is intended to fill that gap. First, we built up a dynamic model of a consumer’s problem of utility maximization in the presence of a nonlinear price schedule embedded in an MSA. Second, the model was implemented using data from a 2-year MSA pilot program in China. The estimated price elasticity under MSAs was between −0.42 and −0.58, i.e., higher than that reported in the literature. The relatively high price elasticity suggests that MSAs as an insurance feature may help control costs. However, the long-term effect of MSAs on health costs is subject to further analysis.

Keywords

Medical savings accounts Health insurance Nonlinear price schedule Elasticity Demand for health care China 

JEL Classification

I13 I18 N35 

Notes

Acknowledgments

The field work for data collection was funded by the European Union for a study of urban health reform in China. The funder has not been involved in the design and conduct of the study, in the collection, analysis, and interpretation of the data, and in the preparation, review, or approval of the manuscript. The study was approved by the IRB at School of Public Health, Shanghai Medical University. The author is grateful to Deming Huang, Jiaying Chen, Shenglan Tang, and Youlong Gong for assistance in data collection, and to Emmett Keeler, Andrew Dick, and two anonymous reviewers for helpful comments. In particular, the author would like to thank Charles Phelps whose constant encouragement made it possible to complete this paper, which was first drafted as a coursework at the University of Rochester.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.RAND CorporationPittsburghUSA

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