Family health spillovers: evidence from the RAND health insurance experiment

I study how family spillovers shape healthcare consumption through two main sources: a learning channel whereby family members share information about their health insurance and the effectiveness of healthcare, and a behavioral channel whereby risk perception and habits are shared and transmitted. I exploit two types of sudden health shocks to identify a causal effect operating through each channel: a spouse’s non-fatal heart attack or stroke and a severe injury to a child. I incorporate these shocks into an event-study framework to quantify the effect of spillovers on healthcare consumption of a non-injured adult family member. I find a significant behavioral spillover effect of an increase of more than 200% in medical expenditure of preventive care over a four-year horizon. Moreover, I find a strong and persistent learning spillover that amounts to an average increase of more than 150% in medical expenditure relative to prior to the health shock, and I demonstrate that this effect promotes health investment. While the first result is in line with previous findings in the literature, the second is novel.