This paper develops a model for interdependent demand for health insurance and health care under uncertainty to throw light on the issue of insurance-ind uced distortions in the demand for health care services.

The model is used to empirically analyze the determinants of the choice of health insurance type and seven types of health care services using micro-level data from the 1977-78 Australian Health Survey. Health status appears to be more important in determining health care service use than health insurance choice, while income appears to be more important in determining health insurance choice than in determining health care service use.