Does free healthcare improve children's healthcare use and outcomes? Evidence from Japan's healthcare subsidy for young children

We investigate the extent to which the subsidy for children's healthcare in Japan affects children's healthcare use and outcomes. The subsidy, which made children's healthcare services essentially free for patients, was introduced and expanded to preschool-age children in the 1990s. We use a difference-in-differences framework by exploiting variations in subsidy status, as the introduction timing and eligibility age differ across municipalities. We find that the subsidy significantly increased the use of outpatient care, as measured by the number of patients, visit intervals, and monthly spending. We also find evidence on the increase of inpatient use only for infants under 12 months of age (i.e., aged zero). Furthermore, the subsidy significantly improved children's subjective health symptoms reported by parents and contributed to reducing the mortality rate for infants by 0.79/1,000 individuals. In summary, our results suggest that free healthcare for children improves their access to healthcare as well as health outcomes, thus prioritizing this investment as part of national healthcare plans.