What do we really know about trends in outpatient medical expenditures for children, 1977-1987?

This analysis of outpatient medical expenditures for children identifies which children experience a relative decline in medical expenditures between 1977 and 1987. The paper also evaluates some standard methodologies used in medical demand estimation. Our semiparametic approach models expenditures simultaneously with the choice of insurance plan and the decision to incur any expenditures. Children in poor families and Hispanic children witness a decline in expenditures relative to other children. Children on Medicaid and black children experience stable expenditures over time. These results imply that the recent Medicaid expansions may not help all children attain good health. The results are sensitive to assumptions of insurance exogeneity, but are insensitive to the assumptions governing the decision to incur any expenditures. The general emphasis in the health economics literature on sample selection instead of insurance endogeneity therefore seems misguided.