Mathematical analysis

Health insurance

Welfare

Distribution (mathematics)

Payment

Health care

Economics

Market liquidity

Market economy

Transfer payment

Consumption (sociology)

Economic growth

Finance

Business

Mathematics

Monetary economics

Social security

Cash

Social insurance

Sociology

Actuarial science

Social science

Face (sociological concept)

American Economic Review Insights

Insurance is typically viewed as a mechanism for transferring resources from good to bad states. Insurance, however, may also transfer resources from high-liquidity periods to low-liquidity periods. We test for this type of transfer from health insurance by studying the distribution of Social Security checks among Medicare recipients. When Social Security checks are distributed, prescription fills increase by 6-12 percent among recipients who pay small copayments. We find no such pattern among recipients who face no copayments. The results demonstrate that more-complete insurance allows recipients to consume healthcare when they need it rather than only when they have cash.

The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments