Patient Cost Sharing and Healthcare Utilization in Early Childhood: Evidence from a Regression Discontinuity Design

Abstract

This paper estimates the price elasticity of healthcare utilization in early childhood. We employ a regression discontinuity design by exploiting a subsidy that reduces patient costsharing for children aged under 3 in Taiwan. Using longitudinal medical claims of over 410,000 children, we find a modest price elasticity of outpatient expenditure (e.g. -0.10 for regular outpatient care). Furthermore, increased cost sharing at age 3 largely decreases the chance of visiting high-intensity healthcare providers (e.g. teaching hospitals) for minor illnesses. In contrast, children’s utilization of inpatient care is price insensitive, providing a rationale for full inpatient care coverage to children.