Top-Up Design and Health Care Expenditure: Evidence from Cardiac Stents

39 Pages Posted: 12 Mar 2020

See all articles by Ginger Zhe Jin

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Hsien‐Ming Lien

National Chengchi University (NCCU)

Xuezhen Tao

Shanghai University of Finance and Economics - College of Business

Date Written: February 19, 2020

Abstract

Taiwan’s National Health Insurance (NHI) has adopted a top-up design for cardiac stents since 2007: the NHI covers the full cost of baseline treatment (bare-metal stents); but if a patient prefers more expensive treatments (drug-eluting stents), she must pay for the incremental cost out of pocket. Such a “top-up” coverage has been advocated as a good model to provide essential care for the mass population and keep the cost of health care under control. To further reduce health spending, the NHI cut the reimbursement rate of bare-metal stents (to hospitals) by 26% in January 2009. We study how hospitals responded to this price change and how such response affects the actual payment from the NHI and patients. Based on individual patient records and hospital-reported stent prices (2007-2010), we find no evidence of hospitals raising the price of drug-eluting stents. However, on average hospitals increase the number of stents per admission by 0.14 in 2009, and most of the increases are for bare metal stents. As a result, the rate cut induces about 18% more BMS usage and providers recoup up to 30% of the revenue loss in 2009 after the NHI rate cut. This suggests that the rate cut is still effective in reducing NHI expenditure on cardiac stents, despite hospital moral hazard.

Keywords: top-up design, health care cost, cardiac stent, moral hazard

JEL Classification: G22, I11, I18

Suggested Citation

Jin, Ginger Zhe and Lien, Hsienming and Tao, Xuezhen, Top-Up Design and Health Care Expenditure: Evidence from Cardiac Stents (February 19, 2020). Available at SSRN: https://ssrn.com/abstract=3540968 or http://dx.doi.org/10.2139/ssrn.3540968

Ginger Zhe Jin

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hsienming Lien

National Chengchi University (NCCU) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Xuezhen Tao (Contact Author)

Shanghai University of Finance and Economics - College of Business ( email )

777 Guoding Road
Shanghai, 200433
China

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