Copayments and Demand for Medical Care: The California Medicaid Experience

This study assesses impacts of a California program in which certain Medicaid beneficiaries were required to make small payments for (previously free) out-of-hospital services. This "copayment" requirement decreased physician visit demand by 8 percent, increased hospital service demand by 17 percent, and increased overall program cost by a (statistically insignificant) 3-8 percent. The estimates derive from behavior comparisons of two groups known to differ, so the results may contain statistical artifacts. If the estimates are correct, however, copayments for ambulatory services in a welfare population may be self-defeating as a method of controlling costs.