Insurance and imperfect financial markets in Grossman's demand for health model - a reply to Tabata and Ohkusa

In the article by Tabata and Ohkusa, they show that the insurance system set out in Liljas [Liljas, B., 1998a. The demand for health with uncertainty and insurance. Journal of Health Economics 17, 153-170.] does not have an optimal solution, and propose a new formulation. It is argued here that even though the new model works mathematically, it has a less realistic economic foundation. Furthermore, generalizing the Grossman model by making the marginal utility of income variable over time is suggested to be more relevant in the case where there are imperfect financial markets, and a simple example is provided. Overall, there seems to be room for further theoretical extensions in the demand for health literature. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: D13; D31; D61; D80; I10; I12.