Table 2. Effects of the Tax Subsidy on the Aggregate Demand for Insurance¹.

Parameter Values	Average Effective Coinsurance Rates
	Total		Hospital		Medical
	No Tax Subsidy	Tax Subsidy	No Tax Subsidy	Tax Subsidy	No Tax Subsidy	Tax Subsidy
Low Price Elasticities (R = 0.0003)2	0.58	0.37	0.44	0.32	0.76	0.43
Moderate Price Elasticities (R = 0.0003)2	0.59	0.46	0.44	0.37	0.79	0.56
Moderate Price Elasticities (R = 0.0005)2	0.55	0.39	0.42	0.33	0.76	0.46

¹All calculations use λ = 0.1. Low price elasticities are n₂₂ = −.0.25 (hospital) and n₂₂ = −0.20 (medical); moderate elasticites are n₁₁ = 0.50 and n₂₂ = −0.40.

²R = Risk Aversion

^*Source: Feldstein and Friedman, 1977