evidence points to a very high level of price sensitivity among Medicaid beneficiaries. It follows
that imposing or increasing premiums and cost sharing in Medicaid or SCHIP could jeopardize
beneficiaries’ ability to afford health services, compromise their health, and ultimately lead to
higher program costs due to greater use of emergency rooms and other types of care.
D. POLICY IMPLICATIONS RELATED TO HEALTH SERVICE USE
The literature includes fewer simulations that use elasticity estimates of demand for health
care services than those that use insurance elasticity estimates. Most of the policy implications
drawn from this literature relate to the implementation of multi-tier copayment structures for
Joyce et al. (2002) concluded that several different approaches to increase cost-sharing
among working-age enrollees with employer-provided drug coverage—adding an additional
level of copayment, increasing existing copayments, or requiring mandatory generic
substitution—would each reduce plan payments and overall drug spending by increasing
copayments on reducing costs was relatively small, although the volume of prescriptions would
fall. In light of the relatively high price elasticity of demand for medications, Goldman et al.
(2004) raised concerns about adverse health consequences that might result from significant
increase in copayments, particularly for patients with chronic illness (in this case, diabetes).