Final answer:
Demand-side cost-sharing, such as deductibles, copayments, and coinsurance, can reduce health care over-utilization by making patients more financially responsible for their care, thereby discouraging unnecessary health services use without negatively impacting health outcomes.
Step-by-step explanation:
A policy recommendation to reduce health care over-utilization is demand-side cost-sharing, an approach where patients share more of the financial burden by paying larger out-of-pocket costs for their care. This cost-sharing can take several forms, such as deductibles, copayments, and coinsurance, all of which are payments that the insured party makes in addition to what their health insurance covers.
For instance, deductibles are a predetermined amount that the policyholder must pay before insurance coverage kicks in. Copayments require policyholders to pay a fixed amount for specific services, like a doctor's visit. Coinsurance is when a policyholder pays a certain percentage of the total costs, while the insurance covers the rest.
The presence of these cost-sharing mechanisms is known to reduce the moral hazard associated with insurance coverage. A well-known study discovered that individuals with moderate deductibles and copayments consumed approximately one-third less medical care compared to those with complete insurance coverage, suggesting that the out-of-pocket expenses might discourage overuse. Importantly, the decrease in utilization did not appear to adversely affect overall health status.