The Effect of Cost Sharing on the Use of Medical Services by Children

Interim Results from a Randomized Controlled Trial

by Arleen Leibowitz, Willard G. Manning, Emmett B. Keeler, Naihua Duan, Kathleen N. Lohr, Joseph P. Newhouse

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This report, a shorter version of which appeared in the May 1985 issue of Pediatrics, considers how cost sharing affects the use of medical care by children under age 14. The authors draw upon data collected during the RAND Health Insurance Experiment to examine total expenditures on medical care and hospital and outpatient use, particularly the use of preventive services. Results indicate that per capita use of medical services was one-third greater for children whose families were assigned to a health plan that reimbursed them completely for medical services than for children whose families paid 95 percent of medical expenses. Outpatient services decreased as cost sharing rose for a variety of measures: the probability of seeing a doctor during the year, total annual expenditures, and number of visits per year. These results imply that reducing the amount of cost sharing for pediatric care will lead to substantial increases in outpatient use. However, reducing coinsurance for children's hospital expenses can be expected to have little impact on total costs of medical care.

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