Effects of time costs on medical care demand

This paper investigates the source of variation in time costs and its effects on the medical care demand of prime-working-age adults. Few studies have provided empirical results on how individuals respond to roundtrip travel time, waiting time in physicians' offices, and delayed appointments even though comprehensive health insurance increases the relative importance of time costs to out-of-pocket monetary costs. Further, most previous studies do not consider men and women separately even though it is a potentially significant source of bias due to different wage levels, reservation wages, and in labor market participation patterns.

I measure time costs as actual time spent per medical visit multiplied by the hourly wage and hypothesize that the time cost as well as out-of-pocket money cost act as a price in medical care demand. I use the 2001 and 2003 Community Tracking Study Household Survey and several different forms of count regression models including negative binomial model I and II, and negative binomial hurdle model.

I find that increased time costs reduce medical care demand significantly. Individuals' responses differ by gender and labor force participation status, apparently primarily due to men's greater participation in the work force and their higher wage levels. Also changes in time costs have a larger effect on general physician visits than on emergency room visits. This may be because emergency situations may make demand less elastic to monetary or time price. Further, I find that waiting time has the largest negative effect among the three time factors. The elasticity of waiting time is approximately -0.2 for men in the labor force. This suggests that time costs do reduce medical care demand given that the elasticity of insurance copayment is known to be between -0.1 to -0.2.

Evidence that time is an important factor in medical care demand is valuable for policymakers as they consider how to make efficient and equitable allocations of medical services. For example, currently several states are considering introducing universal health insurance. If the expanded health insurance increases medical care demand, which subsequently increases the waiting time in physician's offices and/or waiting time for the next appointment given that medical care supply is fixed, the effect of expanded health insurance would be partly offset by the effects of time costs. Therefore, ignoring the non-monetary factors in medical care demand would make the policymakers misinterpret people's behavior and may result in unintended policy outcomes.