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those enrolled in an HMO (which involved lower out-of-pocket costs) and those enrolled in a

fee-for-service (FFS) plan. He found that the demand for outpatient care was 16 percent greater

in the HMO (largely related to a greater incidence of any use, not more visits per person) than in

the FFS plan, but there was no difference in the probability of an inpatient admission.


Emergency Department Services

While the HIE found little difference in price elasticity between emergency departments

visits and the general ambulatory care, more recent research has found a significant difference.

Examining emergency department use in an HMO, Selby et al. (1996) considered the effects on

the number of emergency department visits associated with the introduction of a $25 to $35

copayment. They found that emergency department visits declined by 14.6 percent among those

enrollees facing the new copayment (controlling for other factors) and still larger reductions in

visits for conditions that the investigators deemed “often not an emergency.” They also observed

a reduction in office visits although there was no change in the copayment for office visits, a

finding that suggests that emergency department visits and office visits (similar to inpatient and

outpatient care) may be complementary rather than substitutes.


Mental Health Services

The inconsistency of the research evidence on the elasticity of demand for mental health

services may reflect both changing perceptions about the use of mental health services and

improving coverage for these services. Analyses of the HIE suggested that the demand for

mental health care was as price-sensitive as the demand for other acute care, especially at low

levels of coinsurance. At a higher level of coinsurance, the demand for mental health care was

about twice as responsive to price as general medical care. However, since the HIE, the changes

in treatment protocols and the reduced stigma associated with mental health care have likely

changed the elasticity of demand for these services. 44

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