Using data derived primarily from the Health Insurance Experiment, this paper analyzes the relationship between medical costs and user co-payment liability. The analysis shows that the increase of insurance deductibles reduces medical costs by discouraging use of services. Further reductions in costs result from directing users to non-certified, non-specialist care providers. Higher costs associated with specialists may be attributable to business styles more than to medically justified factors, and the author suggests that sanctioning high-cost specialists might prove an effective mechanism for reducing costs.
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