RAND Health Insurance Experiment
RAND Corporation · United States (6 sites) · 1974
Summary
The RAND HIE is the most important health insurance experiment ever conducted. The core finding—that free care increases use by 30% with no average health benefit—was used to justify cost-sharing in public programs. The crucial nuance: for poor patients with chronic conditions, free care substantially improved blood pressure control and vision. The experiment revealed that across-the-board cost-sharing policies harm the most vulnerable patients most. It remains the primary evidence base for debates about insurance design 50 years later.
Research question
"Does cost-sharing (co-payments) reduce health care utilization, and does reduced utilization harm health?"
Methodology
Intervention
Families randomly assigned to health plans with varying cost-sharing: free care vs. 25%, 50%, or 95% co-insurance up to income caps
Assignment
Randomized controlled trial (family)
Sample size
3,958 non-elderly families, followed 3–5 years
Primary outcome
Health care utilization; health outcomes; financial burden
Effect estimate
Free care group used 30% more services than 95% co-insurance group; no significant health outcome differences for average participants; poor and sick patients on free care had meaningfully better blood pressure and vision outcomes
Decision
Findings shaped Medicare and Medicaid cost-sharing design for decades; evidence used in both directions: cost-sharing advocates cited reduced utilization; universal coverage advocates cited harm to poor/sick patients
Result
Mixed
Free care group used 30% more services than 95% co-insurance group; no significant health outcome differences for average participants; poor and sick patients on free care had meaningfully better blood pressure and vision outcomes
Evidence strength
Moderate
Randomized trial; replication status unknown or limited.
Replication status
N/A
Institution
RAND Corporation
Location
United States (6 sites)
Year
1974
Policy area
Public Health
Mechanism
Price signal