When co-payments for physician visits can affect supply as well as demand: findings from a natural experiment in Israel's national health insurance system

In 1998, Israel's national health insurance system introduced a modest co-payment for visits to specialist physicians. This study takes advantage of a natural experiment in which 15% of the population-the poor and disabled-was exempted from these co-payments. It used the micro-level panel data of three large health plans on the physician visits of 50 000 members per plan in 1997-2001. The data indicate that, following introduction of the co-payment, specialist visits increased among non-exempt members, relative to exempt members, of two health plans that together account for two-thirds of the population. This paper illustrates how, unlike the Health Insurance Experiment and other US studies of cost sharing, the structure of the co-payment in Israel may have inadvertently limited the incentive to decrease consumer demand and may have created an incentive for the health plans to increase visit rates, especially among the non-exempt members. Other countries that have implemented co-payment systems with exemptions may benefit from the Israeli experience in designing and evaluating their systems. Copyright (C) 2010 John Wiley & Sons, Ltd.