Does High Cost-Sharing Slow the Long-term Growth Rate of Health Spending? Evidence from the States

Molly Frean and Mark Pauly

No 25156, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Research has shown that higher cost-sharing lowers health care spending levels but less is known about whether cost-sharing also affects spending growth. From 2002 to 2016, private insurance deductibles more than tripled in magnitude. We use data from the Centers for Medicare and Medicaid Services and the Agency for Healthcare Research and Quality to estimate whether areas with relatively higher deductibles experienced lower spending growth during this period. We leverage panel variation in private deductibles across states and over time and address the potential endogeneity of deductibles using instrumental variables. We find that spending growth is significantly lower in states with higher average deductibles and observe this relationship with regard to both private insurance benefits and total spending (including Medicare and Medicaid), suggestive of potential spillovers. We hypothesize that the impact on spending growth happens because deductibles affect the diffusion of costly new technology.

JEL-codes: I11 I13 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-hea and nep-ias
Note: EH
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