460 C. VAN DE VOORDE ET AL Although the hie produced the most rigorous specialist care using cross-sectional data from the results to date on how individuals and families 1997 Belgian Health Interview Survey, and found react to cost sharing, it was from the outset that, after controlling for differences in levels of incapable of estimating the effect of cost sharing health, income, education and physician supply, on an entire population because it could not the group facing reduced co-payment rates (i.e assess how the health care system would react. the low-income WoPI) had a 35% higher proba- f, on the contrary, all physician and hospital bility of seeing a GP in a given time period. These utilization by all patients in the sites had been results suggest that co-payments in the bea s subjected to cost-sharing, and all individuals re- context do seem to have a moderating effect sponded as the hiE coinsurance groups did, then physician utilization. This suggests that doctors health care providers would have experienced a ability to preserve incomes, for example, by 15%-30% decrease in (gross)incomes/revenues. creasing the number of physician-initiated visits, supplier response, but how large, and of what the Belgian fee-for-service remuneration setting, ype? These are critical questions for policy- any reduction in utilization automatically leads to makers considering the introduction of user a proportional decrease in average phy harges. Unfortunately the HIE cannot provide comes, as doctors have very few options to in- crease the revenue per item of service, for Although Newhouse[8] argues that the magni- example, by substituting higher priced visits tude of such a supplier-induced demand response (home visits, weekend visits) for lower priced of- kely to be limited and concludes his book with fice visi the statement that 'the evidence thus seems con- Two recent examples from France which were vincing to us that a widespread increase in cost not included in the reviews have some relevance sharing would reduce demand and use, just as it for the present study. Chiappori et al. 13, 14]exam did when employed on a small scale in the Exper- ined the response in the demand for home and to examine whether some of the experimental conduct a e nd specialists in France after the introduction l0% experiment by comparing a findings can be replicated in a real world setting sample of bank and insurance employees with a which is not isolated from potential supplier re- (reinsured)control group. Their results indicate a modest effect on GP home visits but no effect on the literature for countries where coinsurance office visits to either the GP or the specialist. Thi rates approximating the rates used in the HE are finding of a very weak price-sensitivity is at tributed to the small share of the monetary price There are some earlier estimates of short-run in the total price of an office visit, as compared price elasticities for Belgium. Van Doorslaer [l] with the substantial share of time and transporta exploited the price variation induced by a reform tion costs. But even these french rates of co- of the co-payment structure for prescription drugs the early eighties to estimate significant nega- applied in the Rand HIE, and the sample used is tive own-price elasticities of the demand for(cer- highly selective. As a result, it is not yet clear tain types of) prescription drugs and cross-price what effects to expect of HIE-size coinsurance/ elasticities of the price of doctor visits. He found Co-payment rates in a real-world setting that the active populations demand for drugs was more responsive to co-payments than the non- active population, and that among the non-active, hose on low incomes DATA ESTIMATION AND TESTING Also Carrin and Van Daal [12], who estimated STRATEGY own-price and cross-price elasticities of the de mand for physiotherapy and dental care, found Our approach consists basically of a test of the that the demand of the active population was less total utilization response to the exogenous change price inelastic than that of the non-active part of in out-of-pocket prices that occurred in 1994.Our the population. Adriaenssen and De graeve [13 data do not allow us to separate the demand recently estimated demand equations for GP andand the supply response, but we can obtain an Copyright a 2001 John Wiley Sons, Ltd Health Econ.10:457-471(2001)460 C. VAN DE VOORDE ET AL. ‘Although the HIE produced the most rigorous results to date on how individuals and families react to cost sharing, it was from the outset incapable of estimating the effect of cost sharing on an entire population because it could not assess how the health care system would react. . . . If, on the contrary, all physician and hospital utilization by all patients in the sites had been subjected to cost-sharing, and all individuals re￾sponded as the HIE coinsurance groups did, then health care providers would have experienced a 15%-30% decrease in (gross) incomes/revenues. This would almost certainly have elicited some supplier response, but how large, and of what type? These are critical questions for policy￾makers considering the introduction of user charges. Unfortunately the HIE cannot provide the answers’ (Stoddart et al. [10]). Although Newhouse [8] argues that the magni￾tude of such a supplier-induced demand response is likely to be limited and concludes his book with the statement that ‘the evidence thus seems con￾vincing to us that a widespread increase in cost sharing would reduce demand and use, just as it did when employed on a small scale in the Exper￾iment’ (p. 371), it seems, nevertheless, warranted to examine whether some of the experimental findings can be replicated in a real world setting which is not isolated from potential supplier re￾sponse. Surprisingly little evidence is available in the literature for countries where coinsurance rates approximating the rates used in the HIE are in effect. There are some earlier estimates of short-run price elasticities for Belgium. Van Doorslaer [11] exploited the price variation induced by a reform of the co-payment structure for prescription drugs in the early eighties to estimate significant nega￾tive own-price elasticities of the demand for (cer￾tain types of) prescription drugs and cross-price elasticities of the price of doctor visits. He found that the active population’s demand for drugs was more responsive to co-payments than the non￾active population, and that among the non-active, those on low incomes were more price responsive. Also Carrin and Van Daal [12], who estimated own-price and cross-price elasticities of the de￾mand for physiotherapy and dental care, found that the demand of the active population was less price inelastic than that of the non-active part of the population. Adriaenssen and De Graeve [13] recently estimated demand equations for GP and specialist care using cross-sectional data from the 1997 Belgian Health Interview Survey, and found that, after controlling for differences in levels of health, income, education and physician supply, the group facing reduced co-payment rates (i.e. the low-income WOPI) had a 35% higher proba￾bility of seeing a GP in a given time period. These results suggest that co-payments in the Belgian context do seem to have a moderating effect on physician utilization. This suggests that doctors’ ability to preserve incomes, for example, by in￾creasing the number of physician-initiated visits, is either very limited or already fully exploited. In the Belgian fee-for-service remuneration setting, any reduction in utilization automatically leads to a proportional decrease in average physician in￾comes, as doctors have very few options to in￾crease the revenue per item of service, for example, by substituting higher priced visits (home visits, weekend visits) for lower priced of￾fice visits. Two recent examples from France which were not included in the reviews have some relevance for the present study. Chiappori et al. [3,14] exam￾ined the response in the demand for home and office visits to GPs and specialists in France after the introduction of a 10% co-payment rate. They conduct a natural experiment by comparing a sample of bank and insurance employees with a (reinsured) control group. Their results indicate a modest effect on GP home visits, but no effect on office visits to either the GP or the specialist. This finding of a very weak price-sensitivity is at￾tributed to the small share of the monetary price in the total price of an office visit, as compared with the substantial share of time and transporta￾tion costs. But even these French rates of co￾payment are very small compared to the ones applied in the Rand HIE, and the sample used is highly selective. As a result, it is not yet clear what effects to expect of HIE-size coinsurance/ co-payment rates in a real-world setting. DATA, ESTIMATION AND TESTING STRATEGY Our approach consists basically of a test of the total utilization response to the exogenous change in out-of-pocket prices that occurred in 1994. Our data do not allow us to separate the demand and the supply response, but we can obtain an Copyright © 2001 John Wiley & Sons, Ltd. Health Econ. 10: 457–471 (2001)