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Copayments and Demand for Medical Care: The California Medicaid Experience

Author

Listed:
  • Jay Helms
  • Jospeh P. Newhouse
  • Charles E. Phelps

Abstract

This study assesses impacts of a California program in which certain Medicaid beneficiaries were required to make small payments for (previously free) out-of-hospital services. This "copayment" requirement decreased physician visit demand by 8 percent, increased hospital service demand by 17 percent, and increased overall program cost by a (statistically insignificant) 3-8 percent. The estimates derive from behavior comparisons of two groups known to differ, so the results may contain statistical artifacts. If the estimates are correct, however, copayments for ambulatory services in a welfare population may be self-defeating as a method of controlling costs.

Suggested Citation

  • Jay Helms & Jospeh P. Newhouse & Charles E. Phelps, 1978. "Copayments and Demand for Medical Care: The California Medicaid Experience," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 192-208, Spring.
  • Handle: RePEc:rje:bellje:v:9:y:1978:i:spring:p:192-208
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    Cited by:

    1. Gaynor Martin & Li Jian & Vogt William B, 2007. "Substitution, Spending Offsets, and Prescription Drug Benefit Design," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-33, July.
    2. Martin Gaynor & Jian Li & William B. Vogt, 2006. "Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits," NBER Working Papers 12758, National Bureau of Economic Research, Inc.
    3. Lipton, Brandy J. & Decker, Sandra L., 2015. "The effect of health insurance coverage on medical care utilization and health outcomes: Evidence from Medicaid adult vision benefits," Journal of Health Economics, Elsevier, vol. 44(C), pages 320-332.
    4. Newhouse, Joseph P., 2006. "Reconsidering the moral hazard-risk avoidance tradeoff," Journal of Health Economics, Elsevier, vol. 25(5), pages 1005-1014, September.
    5. McGregor, P. & Nolan, Anne & Nolan, Brian & O'Neill, C., 2006. "A Comparison of GP Visiting in Northern Ireland and the Republic of Ireland," Papers HRBWP22, Economic and Social Research Institute (ESRI).

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