The Effect of Disability Insurance on Health Investment

Perry Singleton, University of Maryland

This paper examines whether individuals are more likely to know their health status after the advent of disability insurance. The internal rate of return of knowing one's health status reflects both the opportunity cost associated with a medical visit and the expected benefits derived from any new information that results. A potential disability payment increases this internal return by increasing expected benefits. The rates of diagnosed and undiagnosed diabetes among veteran males are examined before and after diabetes mellitus became a compensable disability under the Department of Veterans Affairs disability compensation program. I find that the diagnostic rate of diabetes increased considerably immediately after policy implementation, and that the onset of new diabetes cases can explain only a fraction of this growth.