An Empirical Examination of Health Care Constraints on Outpatients in Japan

Posted: 19 Jun 2007

See all articles by Narimasa Kumagai

Narimasa Kumagai

Kinki University - School of Economics

Date Written: June 10, 2007


Motivation: The purpose of this research is to examine the effects of restrictions on both the demand and supply side over a period of time. The former results from an increase in the coinsurance rate for patients; the latter results from a hospital bed reduction by the government. The cost-sharing rule of Government-managed Health Insurance (GHI) changed in September 1997. At that time the coinsurance rate for its employees was raised from 10 to 20 percent; in April 2003 it was raised again, this time from 20 to 30 percent. The coinsurance rate of dependents has stayed the same (30 percent). Although countries with national health insurance typically rely on supply side constraints to keep expenditures under control, the effect of supply side restrictions could not be taken into account in previous studies. We employed econometric time series techniques to develop a vector autoregressive model in order to capture the shocks on both the demand and supply side.

Methodology/Data: To calculate the total price of the demand from outpatients, we focused on GHI because the health insurance system has an invalidity benefit for insured persons. GHI includes workers employed by small and medium companies. An insurer of GHI is the national government. We use a first difference series in the number of general beds to capture the productivity shock. Assuming that the amount of capital is fixed in the short run, we constructed a four variable VAR model for the health sector. The amount of labor in the health sector and the number of general beds were obtained from "The Operational Index of the Third Industrial Sector" of the Ministry of Commerce and Industry and the "Census of Medical Care Institutions and Hospital Report" of the Ministry of Health, Labor and Welfare, respectively. The rate of doctors' consultations, the health care expenditure per case for outpatients and the effective rate of out-of-pocket payments were calculated from the "Annual Operational Report" of the Social Insurance Agency.

Results: By using impulse response functions and a forecast error variance decomposition, we found that the rise in the intensity of treatments leads to an increase in the rate of doctors' consultations in the short run, although a price shock dominates the behavior of both patients and physicians at forecast horizons. A price shock accounts for about 70 percent of the forecast error variance of health care expenditures for outpatient per case after the first eight months.

Conclusion: We conclude that the increase in the coinsurance rate of the patient had the effect of restraining health care expenditures but that a labor supply shock did not have a permanent effect on the patient. What caused the differences between the response to a price shock and the response to a labor supply shock? We guess that the supply side of the health sector may absorb the change that occurred in the demand side from the shocks.

Keywords: coinsurance rate, Government-managed Health Insurance, vector autoregressive model

JEL Classification: C22, C51, H51, I11

Suggested Citation

Kumagai, Narimasa, An Empirical Examination of Health Care Constraints on Outpatients in Japan (June 10, 2007). iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN:

Narimasa Kumagai (Contact Author)

Kinki University - School of Economics ( email )

+81- 6- 6721- 2332 (Phone)

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