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. We conclude that:
- $220 copayments for inpatient hospital care reduced hospital admissions;
- $2 copayments for physician services led Medicaid patients to see doctors less often, and increasing copayments to $3 caused further reductions;
- $2 copayments for prescription drugs reduced patients’ use of prescription drugs; and
- $2 or $3 copayments for outpatient hospital clinic visits lowered the number of such visits.
Some of our conclusions conflict with those reached by state officials. A UDOH report concluded that Medicaid beneficiaries in that state did not use less health care after copayments were imposed. This finding has been cited as evidence that copayments do not adverse affect Medicaid beneficiaries. Our review indicates that portions of the state’s analyses were technically flawed. This paper presents revised analyses that reassess the impact of the copayments in Utah.
Our reanalysis finds that the copayments decreased health care utilization for Utah’s Medicaid beneficiaries. Such a finding is more consistent with other information from Utah, as well as being more consistent with prior research. For example, UDOH also reported findings from a survey of Medicaid enrollees in which one-ninth of enrollees reported not seeing a doctor because they could not afford the physician copayments. When Utah submitted its application for a Section 1115 waiver that authorized increased copayments for parents, the state assumed that copayments would reduce health care use and expenditures and that these savings would finance other parts of the state’s waiver project. 
An underlying goal of Utah’s Medicaid waiver was to foster use of preventive and primary care in the hope that this would reduce the need for hospitalization. Our analysis suggests that the Medicaid copayments interfered with the use of physician services and medications. While hospitalization rates fell, it appears that this occurred because patients could not afford the copayments. There is no evidence that hospitalizations fell because patients received more primary or preventive care.
UDOH’s survey of beneficiaries’ experiences with nominal copayments provides other useful insights into the effect of cost-sharing on low-income Medicaid beneficiaries. While some did not have problems with the copayments, many others did. Some 42 percent of those surveyed responded that, “[The copayments for doctor visits and prescription drugs] seem small, but are actually a huge problem,” and 39 percent reported “They cause serious financial difficulties for me.”
While $2 or $3 copayments may seem modest, they can create barriers to the use of health services for a number of low-income patients. This analysis does not examine whether the reduction in health care utilization affects the use of “essential” health services or harms patients’ health, but prior studies have found that copayments reduce the use of “essential” as well as “less essential” services and that the use of fewer essential services contributes to subsequent health problems or to higher medical expenses if patients become sicker and require more intensive medical care. 
Ku, L., Deschamps, E., & Hilman, J. (2004). The Effects of Copayments on the Use of Medical Services and Prescription Drugs in Utah's Medicaid Program. , (). Retrieved from http://hsrc.himmelfarb.gwu.edu/sphhs_policy_facpubs/847