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

25 Pages Posted: 28 Apr 2012 Last revised: 30 Apr 2012

See all articles by Amitabh Chandra

Amitabh Chandra

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Robin McKnight

Wellesley College; National Bureau of Economic Research (NBER)

Date Written: April 2012

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.

Suggested Citation

Chandra, Amitabh and Gruber, Jonathan and McKnight, Robin, The Impact of Patient Cost-Sharing on the Poor: Evidence from Massachusetts (April 2012). NBER Working Paper No. w18023, Available at SSRN: https://ssrn.com/abstract=2047294

Amitabh Chandra (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Robin McKnight

Wellesley College ( email )

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National Bureau of Economic Research (NBER)

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United States

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