Top-Up Design and Health Care Expenditure: Evidence from Cardiac Stents
43 Pages Posted: 12 Mar 2020 Last revised: 6 Nov 2020
Date Written: November 5, 2020
Since 2006, Taiwan's National Health Insurance (NHI) covers the full cost of baseline treatment in cardiac stents (bare-metal stents, BMS), but requires patients to pay the incremental cost of more expensive treatments (drug-eluting stents, DES). Within this "top-up" design, we study how hospitals respond to a 26% cut of the NHI reimbursement rate in 2009. We find hospitals do not raise the DES prices from patients, but increase BMS usage per admission by 18%, recouping up to 30% of the revenue loss in 2009-2010. Overall, the rate cut is effective in reducing NHI expenditure despite hospitals' moral hazard adjustment.
Keywords: top-up design, health care cost, cardiac stent, moral hazard
JEL Classification: G22, I11, I18
Suggested Citation: Suggested Citation