Health insurance and the demand for medical care: evidence from a randomized experiment.

TLDR

The study estimates how cost sharing influences the demand for medical services. The analysis uses data from a randomized experiment. A catastrophic insurance plan cuts expenditures by 31 % compared to zero out‑of‑pocket costs, with a price elasticity of about –0.2, and no evidence that poorer outpatient coverage raises total spending.

Abstract

We estimate how cost sharing, the portion of the bill the patient pays, affects the demand for medical services. The data come from a randomized experiment. A catastrophic insurance plan reduces expenditures 31 percent relative to zero out-of-pocket price. The price elasticity is approximately -0.2. We reject the hypothesis that less favorable coverage of outpatient services increases total expenditure (for example, by deterring preventive care or inducing hospitalization).