Cost sharing, supplementary insurance, and health services utilization among the Medicare elderly

This paper investigates the extent to which private supplementary insurance and Medicaid, which vitiate the effect of Medicare cost-sharing, encourage elderly beneficiaries to seek additional medical care. A multivariate model of health services utilization is estimated with the Tobit technique, using the 1976 Health Interview Survey. We find that either private or public supplementation induces greater use of hospital and physician services, though in amounts that vary considerably according to health status. The paper closes with observations on cost savings brought about by Medicare cost-sharing and some implications for equity among beneficiaries.