Abstract

Nonmonetary factors are expected to assume an increasingly important role in determining the demand for medical care as the out-of-pocket money price falls (due to spreading health insurance coverage or the enactment of the federal health insurance legislation). A utility maximization model is used to develop predictions for the demand for "free" and nonfree care. A simultaneous-equation system is estimated on a survey of users of New York City's "free" outpatient departments and municipal hospitals. The empirical results support the major predictions that nonmonetary factors such as travel distance will function as prices in discouraging demand and that earned and nonearned income have different impacts. A number of implications for public policy are suggested, including the possibility of substituting income maintenance for the direct provision or insurance of medical care.