Rising medical expenditures are increasingly posing an acute fiscal challenge to governments. One strategy for the governments to contain health care costs is patient cost-sharing, where government simply requires patients to pay a larger share of the cost of care. However, cost-sharing has clear tradeoffs. On the benefit-side, cost-sharing may reduce direct costs by decreasing the unnecessary health care services. But on the potential cost-side, it may also reduce access to beneficial and necessary health care that could mitigate future severe and costly health events. Nonetheless, credible evidence on the price sensitivity of health care consumption and its effect on health are very scarce in general, and especially for children, which is our focus in this study. Children are indeed focus of recent health care policy both in Japan and the US. For example, in October 2002, Japanese government has lowered the patient cost-sharing for those below age 3 from 30 % to 20 %, and local governments further subsidize health care for children. Similarly in the US, one of main features of recent Obama health care reforms is the expansion of the Medicaid, which provides health insurance for low-income mothers and their children. Therefore, solid empirical evidence that can justifies/nullifies such interventions by central and local governments for child health care is desperately needed. This study has three objectives. First, we estimate the demand elasticity of outpatient care among children for both Japan and the US. In case of Japan, we exploit the abrupt change in price subsidy to outpatient care at a certain age cut-off to compute the price elasticity. In case of the US, we exploit the considerable state variation in Medicaid eligibility in the US, to estimate the demand elasticity of health care among children in the US. Second, we examine whether preventive and beneficial outpatient care replaces future avoidable inpatient admissions. This question is very important because if outpatient care is indeed "substitute" for inpatient care, cost-saving by decrease in outpatient care can be eventually "off-set" by the subsequent increase in costly inpatient admissions. To our knowledge, there is no study which examines the substitution effects in child health care. Finally, comparing the price elasticity for health care among children from Japan and the US, we discuss the appropriate policy for child health care. One important consideration is the role of health insurance. Since Japan has universal insurance coverage, the price elasticity is estimated using the price variation due to patient cost-sharing. On the other hand, Medicaid provides the health insurance per se, and thus demand elasticity for the US is estimated by comparing health care utilization of those who obtained health insurance and not. If we can view that provision of health insurance is reducing the cost-sharing from 100% to the level of cost-sharing imposed by Medicaid, these two estimates may be similar. However, if the health insurance itself has other effect such as an increase in access to the primary physicians, these two estimates may be capturing distinct elements of health insurance.