A Multimodal Model of Health Care Prices
- Presenter:
Chair: Dave Vanness; Discussant: Christopher Hollenbeak Mon June 6, 2006 15:30-17:00 Room 235
In the demand for health care, price is a central determinant, yet the modeling of out-of-pocket prices is poorly understood. This paper studies the multimodality of out-of-pocket prices using a mixture of Gaussians that allows for the estimation of modal shifts and variation around the modes. We describe how prices may vary continuously due to market fluctuations, and may shift between modes because of contracts, search costs, bulk purchasing, and price discrimination. A better understanding of the endogeneity of out-of-pocket prices not only improves our ability to identify the demand for health care, these models better characterize the financial burden of poor health. To illustrate this point, we examine 1992-2002 data from the Medicare Current Beneficiary Survey, specifically the bimodality of medication prices among seniors.
