Estimating Price Elasticities of Convalescent Care Programmes

Abstract

This study is the first to estimate price elasticities of demand for convalescent care programmes. In 1997, the German legislature more than doubled the daily co-payments for the publicly insured from € 6t o€13. The measure caused the overall demand for convalescent care treatments to fall by 20 to 25%. I estimate the price elasticity for medical rehabilitation programmes aimed at preventing work disability to be about � 0.3, whereas the elasticity for medical rehabilitation programmes for recovery from accidents at work lies around � 0.5. The demand for preventive treatment at health spas is elastic and less than � 1. How does the demand for medical care change when prices change? Since the early days of the profession of health economics, the question of the price elasticity for health services has been central. Joseph P. Newhouse, one of the founders of the field of health economics, has published more than 100 articles alone on health care demand. Newhouse was also the leader of the RAND group that designed and directed the famous RAND Health Insurance Experiment that focused on the impact of costsharing on the demand for medical care. Not only Newhouse but also many other economists have devoted a great deal of attention to this topic.