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The Effects of Copayments on the Use of Medical Services and Prescription Drugs in Utah’s Medicaid Program

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In recent years, a number of states have increased cost-sharing for low-income Medicaid beneficiaries as one approach to Medicaid cost-containment. While copayments have been most commonly applied to prescription drugs, they also have been assessed for other services, such as physician visits, hospital admission, or outpatient clinic use.

Prior research has found that when low-income patients are required to pay more for health care services or for prescription drugs, they use fewer services or medications. In some cases, their health could deteriorate, with the result that they may subsequently require more expensive emergency room or inpatient hospital care. While private insurance often requires copayments, the low-income patients covered by Medicaid are more likely to experience adverse consequences from copayments because they have a more difficult time affording higher copayments for medications or doctor visits. Low-income patients are also more likely to have fragile health.

This paper presents findings from an analysis of data about changes in the use of medical services and prescription drugs that occurred after “nominal” copayments were instituted in Utah’s Medicaid program in the 2001-2002 period, based on data collected by the Utah Department of Health (UDOH). Our analyses take advantage of the natural experiment that occurred after copayments were imposed on Medicaid beneficiaries.