Ethel Zimmerman Wiener Professor of Public Policy, HKS; Henry and Allison McCance Professor of Business Administration, HBS
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.
Chandra, Amitabh, Jonathan Gruber, and and Robin McKnight. "Patient Cost-Sharing and Hospitalization Offsets in the Elderly." American Economic Review 100.1 (March 2010): 193-213.