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Patient Cost-Sharing and Hospitalization Offsets in the Elderly

Amitabh Chandra¹; Jonathan Gruber²; Robin McKnight³

¹ Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138, and NBER. · ² Department of Economics, MIT, 50 Memorial Drive E52-355, Cambridge, MA 02142, and NBER. · ³ Department of Economics, Wellesley College, 106 Central Street, Wellesley, MA 02481, and NBER.

In the Medicare program, increases in cost sharing by a supplemental insurer can exert financial externalities. We study a policy change that raised patient cost sharing for the supplemental insurer for retired public employees in California. We find that physician visits and prescription drug usage have elasticities that are similar to those of the RAND Health Insurance Experiment (HIE). Unlike the HIE, however, we find substantial "offset" effects in terms of increased hospital utilization. The savings from increased cost sharing accrue mostly to the supplemental insurer, while the costs of increased hospitalization accrue mostly to Medicare.

DOI

10.1257/aer.100.1.193

Volume

100 (1)

Pages

193-213

Language

en

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