The Impact of Insurance on Recommended Medical Care, Lifestyle Behaviors and the Health of Non-Elderly Diabetics

This paper examines the impact of health insurance coverage on diabetics’ decisions to monitor, treat and manage their condition and gauges the effect of these decisions on their health. Diabetics can experience serious or fatal complications without regular monitoring (of blood glucose and other indicators of disease severity) and, in some cases, prescription medication. These activities can present a significant financial burden that could be substantially attenuated by health insurance. Through cross-price effects, insurance may also influence important lifestyle choices such as exercise and diet. However, insurance status is likely to be determined simultaneously with these behaviors in shaping health. Using a sample of non-elderly diabetics, I jointly estimate demand equations for health insurance, medical treatment, lifestyle decisions and health with a sample of non-elderly diabetics, controlling for their common unobserved determinants. I find that insurance with drug coverage leads to better adherence to diabetic care guidelines. Furthermore, the presence of insurance lowers the probability of eye and kidney problems. I estimate that individuals value the former at over $40,000. There is, however, some evidence of ex ante moral hazard: those covered by insurance with a drug plan show slightly lower probabilities of exercising regularly. ∗I would like to thank Donna Gilleskie, Thomas Mroz, John Akin, Peter Lance, Helen Tauchen and Edward Norton. All errors are my own. †Department of Economics, Gardner Hall, CB#3305, UNC-Chapel Hill, Chapel Hill, NC 27599-3305. Email: [email protected]