TY  - JOUR
AU  - Meer,Jonathan
AU  - Rosen,Harvey S.
TI  - Insurance and the Utilization of Medical Services
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9812
PY  - 2003
Y2  - July 2003
UR  - http://www.nber.org/papers/w9812
L1  - http://www.nber.org/papers/w9812.pdf
N1  - Author contact info:
Jonathan Meer
Department of Economics
TAMU 4228
College Station, TX 77843
Tel: 979/845-2059
Fax: 979/847-8757
E-Mail: jmeer@econmail.tamu.edu

Harvey S. Rosen
Department of Economics
Fisher Hall
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-4022
Fax: 609/258-6419
E-Mail: HSR@princeton.edu
AB  - Most data sets indicate a positive correlation between having health insurance and utilizing health care services. Yet the direction of causality is not at all clear. If we ob-serve a positive correlation between the utilization of health care services and insurance status, we do not know if this is because people who anticipate poor health buy more in-surance (or take jobs with generous medical coverage), or because insurance lowers the cost of health care, increasing the quantity demanded. While a few attempts have been made to implement an instrumental variables (IV) strategy to deal with endogeneity, the instruments chosen have not been entirely convinc-ing. In this paper we revisit the IV estimation of the reduced form relationships between insurance and health care utilization taking advantage of what we argue is a good instru-ment - the individual's self-employment status. Our main finding is that a positive and statistically significant effect of insurance continues to obtain even after instrumenting. Indeed, instrumental variables estimates of the impact of insurance on utilization of a variety of health care services are larger than their non-instrumented counterparts. The validity of this exercise depends on the extent to which self-employment status is a suitable instrument. To argue this case, we analyze panel data on transitions from wage-earning into self-employment and show that individuals who select into self-employment do not differ systematically from those who remain wage-earners with re-spect to either the utilization of health care or health status. While this finding does not prove that self-employment status is an appropriate instrument, it is encouraging that there appear to be no underlying differences that might lead to self-employment per se affecting health services utilization.
ER  -