Charging for health care: Evidence on the utilisation of NHS prescribed drugs

The effects of regular and frequent increases in charges for health care on patient utilisation are analysed using monthly data on National Health Service (NHS) prescribed drugs in England for the period 1979-1985. Using a partial adjustment model a utilisation equation of prescribed drugs is estimated for the adult non-elderly population that is subject to the NHS prescription charge. The maximum likelihood estimates of the coefficients of the equation imply that the charges policy followed in the U.K. has led to a significant reduction in utilisation among non-exempt patients. The short-run price elasticity of utilisation is -0.109 and the long-run elasticity is -0.09, while exempt utilisation is unaffected. Although the policy has generated a reduction in the central Government expenditure for prescribed drugs, on the basis of these estimates around 66% of these savings arise from the reduction in service use as opposed to the increased revenue per item of drugs.