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Dangerous Liquidity and the Demand for Health Care: Evidence from the 2008 Stimulus Payments

Dangerous Liquidity and the Demand for Health Care: Evidence from the 2008 Stimulus Payments Household finances can affect health and health care through several channels. To explore these channels, we exploit the randomized timing of the arrival of the 2008 Economic Stimulus Payments. We find that the payments raised the probability of an adult emergency department visit over the following 23 weeks by an average of 1.1 percent. This effect is difficult to reconcile with the Permanent Income Hypothesis. We observe little impact on avoidable hospitalizations or emergency visits for nonurgent conditions and no difference in effects as a function of health insurance coverage. By contrast, we show that the increase is driven by visits for urgent medical conditions, like drug- and alcohol- related visits. Complementary evidence suggests that consumers are not simply substituting from outpatient doctor visits to hospital care. The results thus suggest that liquidity constraints may not constitute a direct barrier to care, but rather that liquidity can increase health care utilization indirectly by increasing the need for care. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

Dangerous Liquidity and the Demand for Health Care: Evidence from the 2008 Stimulus Payments

Journal of Human Resources , Volume 49 (2) – Apr 23, 2014

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Publisher
University of Wisconsin Press
Copyright
©by the Board of Regents of the University of Wisconsin System
ISSN
1548-8004

Abstract

Household finances can affect health and health care through several channels. To explore these channels, we exploit the randomized timing of the arrival of the 2008 Economic Stimulus Payments. We find that the payments raised the probability of an adult emergency department visit over the following 23 weeks by an average of 1.1 percent. This effect is difficult to reconcile with the Permanent Income Hypothesis. We observe little impact on avoidable hospitalizations or emergency visits for nonurgent conditions and no difference in effects as a function of health insurance coverage. By contrast, we show that the increase is driven by visits for urgent medical conditions, like drug- and alcohol- related visits. Complementary evidence suggests that consumers are not simply substituting from outpatient doctor visits to hospital care. The results thus suggest that liquidity constraints may not constitute a direct barrier to care, but rather that liquidity can increase health care utilization indirectly by increasing the need for care.

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: Apr 23, 2014

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