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Patient Cost-Sharing and Healthcare Spending Growth

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  • Katherine Baicker
  • Dana Goldman
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    Abstract

    In this paper, we explore the role patient incentives play in slowing healthcare spending growth. Evidence suggests that while patients do indeed respond to financial incentives, cost-sharing does not uniformly improve value; rather, cost-sharing provisions must be deliberately structured and targeted to reduce care of low marginal value. Other mechanisms may be helpful in targeting particular populations or types of utilization. The spillover effects between privately insured and publicly insured populations as well as market imperfections suggest a potential role for public policy in promoting insurance design that slows spending growth while increasing the health that each dollar buys.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.25.2.47
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 25 (2011)
    Issue (Month): 2 (Spring)
    Pages: 47-68

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    Handle: RePEc:aea:jecper:v:25:y:2011:i:2:p:47-68

    Note: DOI: 10.1257/jep.25.2.47
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    References

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    1. Glied, Sherry & Zivin, Joshua Graff, 2002. "How do doctors behave when some (but not all) of their patients are in managed care?," Journal of Health Economics, Elsevier, Elsevier, vol. 21(2), pages 337-353, March.
    2. repec:mpr:mprres:6204 is not listed on IDEAS
    3. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(1), pages 10-26, March.
    4. Newhouse, Joseph P., 2006. "Reconsidering the moral hazard-risk avoidance tradeoff," Journal of Health Economics, Elsevier, Elsevier, vol. 25(5), pages 1005-1014, September.
    5. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 251-77, June.
    6. Baker, Laurence C & McClellan, Mark B, 2001. "Managed Care, Health Care Quality, and Regulation," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 30(2), pages 715-41, June.
    7. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(1), pages 1-37, 02.
    8. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, Elsevier, vol. 16(4), pages 453-481, August.
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    Cited by:
    1. Amitabh Chandra & Jonathan Holmes & Jonathan Skinner, 2013. "Is This Time Different? The Slowdown in Healthcare Spending," NBER Working Papers 19700, National Bureau of Economic Research, Inc.
    2. Katherine Baicker & Amitabh Chandra, 2011. "Aspirin, angioplasty and proton beam therapy: the economics of smarter health-care spending," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 197-235.
    3. Mark Stabile & Sarah Thomson, 2014. "The Changing Role of Government in Financing Health Care: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 480-518, June.
    4. Jeffrey Clemens, 2013. "The Effect of U.S. Health Insurance Expansions on Medical Innovation," NBER Working Papers 19761, National Bureau of Economic Research, Inc.
    5. Jaume Puig-Junoy & Pilar Garcia-Gomez & David Casado-Marin, 2011. "Free Medicines thanks to Retirement: Moral Hazard and Hospitalization Offsets in an NHS," Tinbergen Institute Discussion Papers 11-108/3, Tinbergen Institute.
    6. Laurence Seidman, 2014. "Medicare For All: A Public Finance Analysis," Working Papers, University of Delaware, Department of Economics 14-02, University of Delaware, Department of Economics.
    7. Nicolas Ziebarth, 2014. "Assessing the effectiveness of health care cost containment measures: evidence from the market for rehabilitation care," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 14(1), pages 41-67, March.
    8. repec:dgr:uvatin:2011108 is not listed on IDEAS
    9. Chandra, Amitabh & Gruber, Jonathan & McKnight, Robin, 2014. "The impact of patient cost-sharing on low-income populations: Evidence from Massachusetts," Journal of Health Economics, Elsevier, Elsevier, vol. 33(C), pages 57-66.
    10. Hossein, Zare & Gerard, Anderson, 2013. "Trends in cost sharing among selected high income countries—2000–2010," Health Policy, Elsevier, Elsevier, vol. 112(1), pages 35-44.

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