Does $1 matter? Health care demand response to a small copayment

Abstract

This paper explores how health care demand responds to a copayment as small as $1. Medinal Benefit (MB) is a health insurance plan provided to the low-income group. I exploit a setting where a copayment of $1 was introduced only to a portion of the MB enrollees who previously received free care. The price of $1 reduced monthly outpatient visits by 10 percent. While I find a reduction in low-value care, such as the inappropriate use of antibiotics, I find a negligible effect on high-value care, such as medication adherence for patients with chronic illnesses. The findings suggest that a small copayment can help mitigate potential moral hazard risk while not forgoing access to essential care.