The Impact of Patient Cost-Sharing on the Poor: Evidence from Massachusetts
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.
We are grateful to Kaitlyn Kenney and the staff at the Massachusetts Health Connector for making these data available. We thank, without implicating, Dan Fetter, Ilyana Kuziemko, and Joseph Newhouse for very helpful suggestions on earlier versions of this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Jonathan Gruber is a member of the Commonwealth Health Connector Board that was responsible for setting the policies studied in this research.
“The Impact of Patient Cost-Sharing on the Poor: Evidence from Massachusetts,” Journal of Health Economics, Volume 33, January 2014, Pages 57–66