Health care demand price elasticies are often estimated from samples conditioned to include only sike people. This paper shows that not only may such estimates be statistically biased, but even when properly estimated they can only be interpreted as short-run price responses.

Should health care provision be public, private, or both? We look at this question in a setting where people differ in their earnings capacity and express an inelastic demand for health care. We assume that illness reduces a person's health status when not receiving immediate treatment.