This paper estimates the price elasticity of healthcare utilization in early childhood. We employ regression discontinuity design by exploiting a subsidy that reduces patient cost-sharing 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. -0.12 for regular outpatient care). Furthermore, cost-sharing subsidy largely increases the chance of visiting expensive healthcare providers (e.g. teaching hospitals) for minor illnesses. In contrast, children’s utilization of inpatient care is price insensitive. Finally, we find no evidence that subsidy-induced healthcare utilization improves children’s health outcome.
American Economic Journal: Economic Policy 12(3), p.238-278