Distributional Consequences of Cost-Sharing in a Universal Healthcare System

Abstract
Patient cost-sharing is used as a tool to limit over-utilization of insured healthcare services in almost all high-income countries. We study its (marginal) distributional consequences in the context of a publicly-funded universal health insurance system, where consumers (as tax-payers) are residual claimants on insurer spending. We highlight the critical distinction between consumers' level of demand versus their elasticity of demand for healthcare services, and estimate the relationship of each of these objects with socio-economic characteristics. Using detailed administrative data on the Norwegian national health insurance scheme, we study a 2010 policy change that raised the age threshold for copayment waivers, thereby increasing patient cost-sharing substantially for adolescents. We find that lower-income individuals have both higher average healthcare utilization as well as higher responsiveness to cost-sharing. Cost-sharing therefore places a larger burden on this group both in terms of the financial cost of out-of-pocket spending and in terms of reduced quantities of healthcare that these individuals choose to utilize. Joint work with Simon Bensnes and Victoria Marone.