What are the RAND Health Insurance Experiments, and what do they tell us about the economics of health care?
Health care is a unique product because most Americans are protected against the uncertainty of incurring medical expenses through health insurance coverage. As a result, the true cost of the care consumed often is not visible to the consumer. However, health insurance frequently does not completely cover the cost of medical expenses. People often are required to pay out-of-pocket coinsurance for services, usually up to some maximum amount, or have a copayment for prescription drugs or emergency room use. In theory, the existence of copayment or coinsurance requires people to consider the value of the services they consume so that they are less prone to overuse unnecessary health care. Do the real world actions of people match with theory? The RAND Health Insurance Experiment was designed and conducted to help answer this and other questions. The RAND Health Insurance Experiment was one of the largest and longest running social science projects ever completed, and the information gathe
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