Working Paper: NBER ID: w18023
Authors: Amitabh Chandra; Jonathan Gruber; Robin McKnight
Abstract: Greater patient cost-sharing could help reduce the fiscal pressures associated with insurance expansion by reducing the scope for moral hazard. But it is possible that low-income recipients are unable to cut back on utilization wisely and that, as a result, higher cost-sharing will lead to worse health and higher downstream costs through hospitalizations. We use exogenous variation in the copayments faced by low-income enrollees in the Massachusetts' Commonwealth Care program to study these effects. We estimate separate price elasticities of demand by type of service (hospital care, drugs, outpatient care). Overall, we find price elasticities of about -0.15 for this low-income population -- fairly similar to elasticities calculated for higher-income populations in other settings. These elasticities are somewhat larger for the chronically sick and older enrollees. A substantial portion of the decline in utilization comes from some patients cutting back on use completely, but we find no (detectable) evidence of offsetting increases in hospitalizations or emergency department visits in response to the higher copayments, either overall or for the chronically ill in particular.
Keywords: patient cost-sharing; healthcare utilization; low-income populations; price elasticity of demand
JEL Codes: I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased copayments (I13) | reduction in overall healthcare utilization (I11) |
| increased copayments (I13) | price elasticity of demand (D12) |
| higher copayments (I13) | no evidence of offsetting increases in hospitalizations or emergency department visits (I19) |
| increased copayments (I13) | reduced outpatient care utilization (I11) |