Does High Cost-Sharing Slow the Long-Term Growth Rate of Health Spending? Evidence from the States

27 Pages Posted: 16 Oct 2018

See all articles by Molly Frean

Molly Frean

University of Pennsylvania - The Wharton School

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Date Written: October 2018

Abstract

Research has shown that higher cost-sharing lowers health care spending levels but less is known about whether cost-sharing also affects spending growth. From 2002 to 2016, private insurance deductibles more than tripled in magnitude. We use data from the Centers for Medicare and Medicaid Services and the Agency for Healthcare Research and Quality to estimate whether areas with relatively higher deductibles experienced lower spending growth during this period. We leverage panel variation in private deductibles across states and over time and address the potential endogeneity of deductibles using instrumental variables. We find that spending growth is significantly lower in states with higher average deductibles and observe this relationship with regard to both private insurance benefits and total spending (including Medicare and Medicaid), suggestive of potential spillovers. We hypothesize that the impact on spending growth happens because deductibles affect the diffusion if costly new technology.

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Suggested Citation

Frean, Molly and Pauly, Mark V., Does High Cost-Sharing Slow the Long-Term Growth Rate of Health Spending? Evidence from the States (October 2018). NBER Working Paper No. w25156, Available at SSRN: https://ssrn.com/abstract=3266272

Molly Frean (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
208 Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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