Patient Copayments, Provider Incentives and Income Effects: Theory and Evidence from China's Essential Medications List Policy

78 Pages Posted: 22 Sep 2013

See all articles by Brian K. Chen

Brian K. Chen

University of South Carolina

Karen Eggleston

Stanford University - Walter H. Shorenstein Asia-Pacific Research Center (APARC)

Date Written: September 19, 2013

Abstract

How do demand- and supply-side incentives interact, when there are potentially large provider income effects? We develop a simple model and empirically test it with data from China’s Essential Medications List (EML) policy, which reduced patient copayments and changed provider incentives by removing a large source of revenue from primary care providers: drug dispensing revenues. Using a panel of patient-level spending and clinical data for Chinese patients with diabetes or hypertension over two and a half years, we find evidence of strategic provider response that dampened the impact of patient copayment reductions. Resource use and patient out-of-pocket spending did not change, when taking account of patient utilization outside primary care.

Keywords: provider payment, insurance, chronic disease management, China, income effects

JEL Classification: I11, I13

Suggested Citation

Chen, Brian K. and Eggleston, Karen, Patient Copayments, Provider Incentives and Income Effects: Theory and Evidence from China's Essential Medications List Policy (September 19, 2013). Stanford Asia Health Policy Program Working Paper No. 37. Available at SSRN: https://ssrn.com/abstract=2328981 or http://dx.doi.org/10.2139/ssrn.2328981

Brian K. Chen (Contact Author)

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

Karen Eggleston

Stanford University - Walter H. Shorenstein Asia-Pacific Research Center (APARC) ( email )

Stanford, CA 94305
United States

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