Benjamin Ly Serena

"Psychotherapy Coverage and Psychiatric Hospital Offsets - Evidence from age Thresholds in Depression Treatment in Denmark"


This paper studies whether psychotherapy coverage leads to cost offsets in psychiatric
hospital use in Denmark. In 2008, the Danish public health insurance introduced a 60 %
subsidy on psychological treatment in the primary care sector, for depression patients aged 18 or more. I exploit this policy change in a regression discontinuity design, comparing health care utilization of individuals on either side of the age threshold before and after 2008.

The results suggest that the subsidy on psychological treatment reduces outpatient psychiatric hospital use by 8.8 %, and that the savings in the hospital sector more than fully offset the cost of the subsidies. The findings of the paper are relevant for optimal health insurance design, as the existence of substitution effects across types of care suggest that the standard Ramsey-style model of health insurance, with optimal cost sharing set proportional to the own-price elasticity of care, can result in an inefficient allocation of patients across health care services.