Copayments and Demand for Medical Care : The California Medicaid Experience.

by L. Jay Helms, Joseph P. Newhouse, Charles E. Phelps

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Employing a Zellner-type indirect regression technique, and data from the 1972 California Copayment Experiment, the authors attempt to assess the impact of a copayment requirement on utilization of health care resources by the poor. Focus is on three questions regarding effects of an increase in out-of-pocket cost of physician office visits: (1) Will such an increase inhibit demand for ambulatory care? (2) Will it increase or decrease demand for hospitalization? (3) How will it affect total resource cost of health care services, both in and out of hospitals? The results indicate that a $1 copayment requirement apparently decreases demand for physician visits by 8 percent and increases demand for hospital inpatient services by 17 percent. Although the confidence intervals are large, point estimates indicate that copayment increases overall program costs by a statistically insignificant 3 to 8 percent. Thus copayments could be self-defeating as a method of controlling medical costs in a welfare population. 29 pp. Ref.

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