The elderly's response to a patient cost-sharing policy in health insurance: Evidence from China

This paper examines the elderly's response to a cost-sharing reduction in health insurance in China. We exploit a cost sharing policy in Urban Employee Basic Medical Insurance that substantially reduces out-of-pocket medical expenditures for the elderly who have reached 60 years old, and conduct a regression discontinuity with a difference-in-difference strategy (RD-DD) to address endogeneity. We find consistent evidence that cost sharing significantly increases the elderly’s hospital utilization, and the estimated price elasticity is −0.67. We find a larger effect on high-cost diseases such as cancer and treatments in high-level hospitals. Many elderly people in China and other developing countries suffer from the underuse of health services due to low income and the expense of medical care. In contrast to most previous studies on cost sharing, which focus exclusively on developed countries, the results of our study provide insights to effectively increase healthcare use among the elderly in developing economies.