Volume 13, (Supplement) 1978
Phelphs, Charles E. 1978. "Illness Prevention and Medical Insurance." Journal of Human Resources 13(S):183-207.
A theory of demand for preventive medical services is developed from a model of an expected-utility-maximizing consumer. Preventive medical care is said to alter the probabilities of illness as well as the final health outcome in sick states. The value of preventive medical care depends upon pure health gains (which directly increase utility), work-loss-time avoided, and out-of-pocket medical expenses avoided. Studies cited from the literature show that many commonly accepted screening procedures have no observable payoff in health status or medial expenses saved. In stark contrast, personal behavioral decisions, such as smoking and dietary patterns, appear to have dramatic effects on health and mortality. Public policy appears to be better directed toward inducement of such health-producing behavior than inducement of further medical preventive procedures.
The author is a Senior Staff Economist of the Rand Corporation. This research was supported by funds for nonexperimental research from the Health Insurance Study, under a grant from the U.S. Department of Health, Education, and Welfare. I would like to acknowledge useful comments from Robert Kane, Emmett Keeler, Will Manning, Patricia Munch, Joseph P. Newhouse, Lisa Hahn Smith, and Rodney Smith, all of the Rand Corporation, and participants in the NBER symposium on the Economics of Patient and Physician Behavior, where this paper was originally presented.
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