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Journal article

Do you have to win it to fix it?: A longitudinal study of lottery winners and their health-care demand

© 2017 American Society of Health Economists and Massachusetts Institute of Technology. We exploit lottery wins to investigate the effects of exogenous changes to individuals’ income on the utilization of health-care services, and the choice between private and public health care in the United Kingdom. Our empirical strategy focuses on lottery winners in an individual fixed-effects framework and hence the variation of winnings arises from within-individual differences in small versus large winnings. The results indicate that lottery winners with larger wins are more likely to choose private health services than public health services from the National Health Service. The positive effect of wins on the choice of private care is driven largely by winners with medium to large winnings (win category > £500 [or US$750]; mean = £1,922.5 [US$2,893.5] , median = £1,058.2 [US$1,592.7]). There is some evidence that the effect of winnings vary by whether individuals have private health insurance. We also find weak evidence that large winners are more likely to take up privatemedical insurance. Largewinners are alsomore likely to drop private insurance coverage between approximately 9 and 10 months earlier than smaller winners, possibly after their winnings have been exhausted. Our estimates for the lottery income elasticities for public health care (relative to no care) are very small and are not statistically distinguishable fromzero; those of private health care range from0 to 0.26 for most of the health services considered, and 0.82 for cervical smear.

Terence C. Cheng, Joan Costa Font and Nattavudh Powdthavee

23 January 2018

American Journal of Health Economics 4(1) , pp.26-50, 2018

DOI: 10.1162/ajhe_a_00092