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expansion of these programs reduces the prices they must pay for care to zero or nearly so,

presumably

increasing

the

amount

of

care

they

demand.

For

a

congressionally

mandated

evaluation of SCHIP, researchers conducted surveys of enrollees and disenrollees in 10 states

(Wooldridge et al. 2005). They found that, relative to their experiences before enrolling, SCHIP

enrollees received more preventive care, had fewer unmet needs (for hospital, specialist, doctor,

prescription drugs, or dental care services), and had better access to and communication with

providers. The same evaluation found similar improvements in access to care among enrollees

in Medicaid programs.

Several states have recently introduced nominal cost sharing in their Medicaid and/or

SCHIP programs (Ku and Broaddus 2005). Observation of these programs offers evidence that

even nominal increases in cost sharing within the program can reduce use of services

dramatically. For example, in Utah’s Medicaid program, the introduction of a $2 copayment per

physician office visit reduced utilization from 600 visits per thousand enrollees to fewer than 500

visits per thousand enrollees within a year (Ku et al. 2004). In part because of their greater

sensitivity to price, consumers with low incomes may be more vulnerable to adverse

consequences from additional cost sharing. Because much of their care is not discretionary, low-

income people with chronic health conditions may be most vulnerable (Ku and Wachino 2005).

3.

Methodological Issues

Several methodological problems make it difficult to estimate the price elasticity of demand

for health services difficult, even in the aggregate. These include the potential for adverse

selection, unobservable effective prices and time prices, and potential for provider-induced

demand.

Adverse Selection. Consumers who are more likely to use services also are more likely to

select insurance plans that require them to pay less out-of-pocket, all else being equal. As a

36

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