How Does Family Health Care Use Respond to Economic Shocks? Evidence from the Great Recession

Families in constrained economic circumstances resulting from economic shocks face difficult choices regarding how best to spend their diminished economic resources. As families strive to preserve their living standards, decisions regarding health care use and its allocation among family members may become far more discretionary and complex. For example, do families share the burden of diminished economic resources by reducing health care use by all family members? Or do they exhibit more altruistic behavior, with children and/or family members with specific health care needs or chronic health conditions receiving priority while other family members reduce their use of particular services? Are preventive health care services sacrificed in order to ensure that financial resources are available for acute care episodes or for those with chronic health care problems? Do families forego other types of services, such as prescription drugs, mental health care, and dental care, and are they more likely to obtain care at emergency rooms or hospital outpatient clinics? Such family decision making has implications not only for the welfare of its members but for society more generally since inadequate care can contribute to greater health care spending over time. 

We consider how an exogenous economic shock affects such outcomes using the presence of the Great Recession (December 2007 to June 2009) as a natural experiment. We pool a series of two-year panel data sets from the Medical Expenditure Panel Survey-Household Component beginning with the 2004/2005 panel and ending with the 2010/2011 panel. We examine how the family’s health care use and its allocation among family members changed over two year periods prior to the recession; two-year periods at the onset and during recession; and two-year periods after the recession officially ended. In this framework, families observed in the two-year panels prior to the recession serve as controls for comparison with families observed at the onset, during, and after the recession. 

 We apply a first-differences econometric framework to assess the change in family-level of health care use and its allocation among family members over these two-year periods. The changes in these outcomes are regressed against changes in the family’s health status, income and employment status, health insurance status and a set of time-specific dummy variables identifying families observed in each of periods noted above. These variables accounts for any residual unmeasured change in the family’s economic status, expectations regarding future economic prospects, and anxiety and stress that are unique to each of these two-year periods. Since observed changes in the family’s economic circumstances, health insurance, health status, and employment can happen in any time period, interacting such variables with the time-specific dummy variables provides information on whether the observed changes in such factors had a greater impact on family health care use during the recession compared to other periods. Preliminary analyses reveal differential effects of the recession relative to the non-recessionary period on changes in the family’s health care allocation. Finally, we assess whether provisions of the Affordable Care Act will protect family health care use from future economic shocks.