Abstract
We use 1996 Medical Expenditure Panel Survey to examine the demand response of ambulatory medical services to demand‐side cost sharing under managed health care and find that demand response to a coinsurance rate is less than that under conventional plans. To address the selection problem, only respondents who were offered a single insurance plan from private establishments are studied. Our results show that managed care, relying on different approaches to ration, has blunted demand response. This suggests that in a managed care context, increasing demand‐side cost sharing will reduce costs to plans mainly by shifting costs to enrollees. (JEL I11)
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