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The Impact of Patient Cost-Sharing on the Poor: Evidence from Massachusetts

  • Amitabh Chandra
  • Jonathan Gruber
  • Robin McKnight

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.

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File URL: http://www.nber.org/papers/w18023.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18023.

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Date of creation: Apr 2012
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Publication status: published as “The Impact of Patient Cost-Sharing on the Poor: Evidence from Massachusetts,” Journal of Health Economics, forthcoming (also available as NBER Working Paper #18023, April 2012) (with Amitabh Chandra and Robin McKnight).
Handle: RePEc:nbr:nberwo:18023
Note: HC
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  1. Chandra, Amitabh & Gruber, Jonathan & McKnight, Robin, 2009. "Patient Cost-Sharing and Hospitalization Offsets in the Elderly," Scholarly Articles 8058412, Harvard Kennedy School of Government.
  2. Buntin, Melinda Beeuwkes & Zaslavsky, Alan M., 2004. "Too much ado about two-part models and transformation?: Comparing methods of modeling Medicare expenditures," Journal of Health Economics, Elsevier, vol. 23(3), pages 525-542, May.
  3. Amitabh Chandra & Jonathan Gruber & Robin McKnight, 2010. "Patient Cost Sharing in Low Income Populations," American Economic Review, American Economic Association, vol. 100(2), pages 303-08, May.
  4. 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, vol. 77(3), pages 251-77, June.
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