Free for Children? Patient Cost-sharing and Healthcare Utilization

Exploiting over 10,000 variations in the levels and forms of patient cost-sharing across municipality over time, we examine how children respond to healthcare prices. Free care significantly increases outpatient spending, with price elasticities considerably smaller than for adults. Small copayment introduced to free care reduces utilization of healthier- rather than sicker children, suggesting that moral hazard can be reduced without raising financial and health risks. We also find that cost-sharing is a “blunt tool,” affecting utilization regardless of service types. Finally, increased outpatient spending due to free care neither improves short- and medium-term health outcomes nor reduces future healthcare spending.