Cost Sharing and the Demand:

This paper measures the sensitivity of consumers to health care cost-sharing using a regression discontinuity. A detailed database of health care services in the Colombian system is available, where the government exogenously determines three levels of co-payments and moderator fees indexed to the monthly income level of the affiliate. It is found that patients exposed to higher co-payments and moderator fees demand fewer health services compared to patients facing lower co-payments and moderator fees. This reduction in consumption is observed in both discretionary and preventive services. Lower utilization of services translates into lower costs, even though among patients facing higher copayments and fees there is no substitution from more expensive providers to cheaper providers. These patients also exhibit better health outcomes compared to patients in the lowest level of cost-sharing, conditional on their pre-ex diagnoses.