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American Economic Review: Vol. 100 No. 1 (March 2010)

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Patient Cost-Sharing and Hospitalization Offsets in the Elderly

Article Citation

Chandra, Amitabh, Jonathan Gruber, and Robin McKnight. 2010. "Patient Cost-Sharing and Hospitalization Offsets in the Elderly." American Economic Review, 100(1): 193-213.

DOI: 10.1257/aer.100.1.193

Abstract

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. (JEL G22, I12, I18, J14)

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Authors

Chandra, Amitabh (Harvard U)
Gruber, Jonathan (MIT)
McKnight, Robin (Wellesley College)

JEL Classifications

G22: Insurance; Insurance Companies
I12: Health Production
I18: Health: Government Policy; Regulation; Public Health
J14: Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination


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