Top-up Design and Health Care Expenditure: Evidence from Cardiac Stents
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.
We thank Matthew Grennan, Ashley Swanson, Jonathan Skinner, Karine Lamiraud, Chiranta Chatterjee, and attendants of the Workshop of Asian Health Economics and Econometrics, the seminar at the Indian Institute of Management Ahmedabad (IIMA) and National Taiwan University for constructive comments. Hsienming Lien appreciates financial support from Ministry of Science and Techology (Grant no: MOST 108-2410-H-004-027-MY2) and Center for Research in Econometric Theory and Applications (Grant no. 109L900201). Xuezhen Tao gratefully acknowledges the support from National Natural Science Foundation of China (No. 72003120). All rights reserved. All errors are ours. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.