Does demand for health services depend on cost-sharing? Evidence from Italy

Many health systems adopt cost-sharing plans - requiring individuals to pay a part of the costs of medical services - to tackle the problem of overconsumption. It is not clear how effective cost-sharing is since the empirical evidence is mainly based on the US system, quite different from the European systems. Using an Italian dataset of about 87000 individuals for 2013, we investigate to what extent the exemption from cost-sharing affects the demand for health services. Estimating a model with Instrumental Variables, we exploit the threshold of age 65 giving complete exemption from cost-sharing, comparing the demand for health services by individuals below and above age 65. We find that individuals with exemption significantly increase their demand for specialist visits, diagnostic checks and drug consumption. This is probably due to the attempt of individuals to over-protect against very low health risks, when they bear no cost.