Cost sharing and the demand for health services in a regulated market.

ABSTRACT

This paper measures consumer responsiveness to cost sharing in healthcare using a regression discontinuity design. I use a novel and detailed claims-level dataset from the Colombian healthcare market, where the government exogenously determines a tier system for coinsurance rates and copays based on the enrollee's monthly income. I find that patients exposed to higher coinsurance rates demand fewer services relative to patients facing lower cost sharing. This reduction holds for both discretionary and preventive services. Lower utilization translates into lower costs, despite evidence that patients facing higher prices do not substitute away from more expensive providers.