Economic Incentives Work – Even for the Poor
Overall, we find price elasticities of about -0.15 for this low-income population – fairly similar to elasticities calculated for higher-income populations in other settings. These elasticities are somewhat larger for the chronically sick and older enrollees. A substantial portion of the decline in utilization comes from some patients cutting back on use completely, but we find no (detectable) evidence of offsetting increases in hospitalizations or emergency department visits in response to the higher copayments, either overall or for the chronically ill in particular.
NBER study from Amitabh Chandra, Jonathan Gruber and Robin McKnight.
Nearly 40 years ago Kenneth Arrow wrote that health care is somehow different than other areas of consumption. The RAND Health Insurance Experiment and other data since then illustrate that patients can be wise consumers when given a reason to do so. Unfortunately, the beliefs of liberal health policy wonks and public health advocates refuse to budge from the notion that the best health care is delivered with no financial considerations whatsoever.
Economics works? Surprise!
In so many respects the “poor” are just like everyone else, they cut back to necessities when it’s their money. Note that the NBER research shows that even though they cut back consumption, their implicitly was no increase in needed services.
interesting study