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Patient Cost-Sharing and Healthcare Utilization in Early
Childhood: Evidence from a Regression Discontinuity Design
Department of Public Finance, NCCU
Hsien-Ming Lien
Motivations
Investment in health in early childhood is widely believed to have a substantial impact in adulthood (Currie, 2009 ; Currie, 2000; Case and Paxson, 2005; Currie and Madrian, 1999)
In light of that, some countries have subsidized medical care for young children by reducing cost-sharing US: providing children (under 14) the health overage
through Children Health Insurance Program Japan: reducing the copayment for young children (aged
less than 6) by 50%. Taiwan: waived the copayment of national health
insurance for young children (aged less than 3)
Motivations
While these programs are generally well received, it remains unclear to what extent young children can benefit from the subsidy on cost-sharing. Do young children obtain more health care in face
of a lower demand price? If yes, is there evidence showing their health
improves after the increase of medical use?
Understanding the magnitude of price elasticity for young children is essential to evaluate these subsidy programs
Previous Literature
Estimates on the price elasticity of health use still relies on results from the Rand Health Insurance Experiment (HIE), a social experiment conducted between 1977 and 1982 that randomly assigned enrollees to insurances of different levels of cost-sharing (from free care (0%) to full cost (95%)) to mitigate the concern of endogenous patient cost-sharing.
HIE findings The health expenditure increases about 50% from the full
cost to the free care coverage The demand elasticity for adults is about -0.2, and -0.1 for
children (under 14). No precise estimates is provided for young children given
the small sample size.
Previous Literature
Davidoff (2005) used the SCHIP program expansion to estimate the use of health care for children (under 14). Results indicate that children of chronic conditions increased their use after obtaining the public coverage, though none of estimates are statistically significant
Several recent studies have used the quasi-experimental design to examine the effect of cost-sharing on the health care for adults and the elderly (Chandra, 2010a; Chandra, 2010b; Chandra, 2012; Hitoshi, 2013), but none of them focused on the young children.
But even the estimates of price elasticity for young children is available, these numbers might not be applicable to other Asian countries The average number of outpatient visits per year
in Asian countries is generally much larger than that in the states.
Taiwan (16, 2004), Japan (17.3, 2003), Korea (11, 2002) U. S. (8.9, 2003)
Research Question
How does a lower cost-sharing affect health use of young children?
Moreover, does the health use of young children respond differently to cost-sharing with respect to Income groups Types of services (e.g. outpatient vs inpatient) Types of diseases (e.g. acute care vs mental
illnesses)
Identifications
We exploit a sharp change in cost-sharing at age 3 in Taiwan, due to Taiwan Children Medical Subsidy Program (TWCMS).
TWCMS covers all the co-payments of medical use for children under 3, but the subsidy stops once a child reaches his 3rd birthday.
The price variation around the 3rd birthday allows us to use a regression discontinuity design (RDD) to examine the causal effect of cost sharing by comparing the spending and use of health care for young children right before and after the 3rd birthday
Change in Cost Sharing at the 3rd Birthday (Outpatient)
55
65
75
85
95
105
115
125
Out
-of-
pock
et c
ost
per
visi
t(N
T$
)
-180 -150 -120 -90 -60 -30 0 30 60 90 120 150 180Age at visits (days from 3rd birthday)
Change in # of Visits at the 3rd Birthday (Outpatient)
500
520
540
560
580
600
Out
patie
nt v
isits
per
10,
000
per
son
yea
rs
-180 -150 -120 -90 -60 -30 0 30 60 90 120 150 180Age at visits (days from 3rd birthday)
Change in Expenditure at the 3rd Birthday (Outpatient)
200000
210000
220000
230000
240000
250000
260000
Out
patie
nt e
xpen
ditu
re p
er 1
0,0
00 p
erso
n ye
ars
(NT
$)
-180 -150 -120 -90 -60 -30 0 30 60 90 120 150 180Age at visits (days from 3rd birthday)
Background: Patient Cost Sharing (I)
Major Teaching Minor Teaching Community ClinicHospital Hospital Hospital
Table 1:
Patient Cost-SharingPatient Cost-Sharing in Taiwan NHI
Panel A:Outpatient service: copayment (NT$)NHI Copay 360 240 80 50Register Fee 150 100 100 50Panel B:Emergency room service: copayment (NT$)NHI Copay 450 300 150 150Register Fee 300 150 100 80
Panel C:Inpatient service: coinsruance1-30 days31-60 daysafter 61 days
10%20%30%
Background: Patient Cost Sharing (II)
Outpatient care Fixed co-payment and registration fee Its amount varies with respect to types of providers. In
general, a better provider charge a higher copayment and registration fee
Inpatient care Fixed coinsurance rate The coinsurance rate depends on the length of stay, but
not the types of health providers. NHI has a annual maximum out-of-pocket expense
(stop-loss) for inpatient admissions (NT52000 in 2012) No deductibles for NHI
Background: Taiwan Children Medical Subsidy Program
In March 2002, the TWCMS was implemented for the following purpose: Reduce the economic burdens of parents Increase the health care use of children Improve the children’s health
TWCMS each year spent NT1.8 billons for children aged below three on cost sharing Co-payment for outpatient and emergency care
(but not the registration fee) Co-insurance rate for inpatient care
A child is no longer eligible for this subsidy program once reaching his/her 3rd birthday
Data
We use claims data from Taiwan's National Health Insurance Database (NHID) NHI is compulsory so NHID covers all individuals in
Taiwan Claim records of inpatient, outpatient and emergency
care use Detailed information about cost-sharing, health care
use and medical expenditure More importantly, our data record the exact date of
outpatient visits, inpatient admissions, and children’s birthdays. Therefore, we can precisely measure when the children are eligible (in days) for subsidy program, essential for RD design
Data
Our sample restricts to children born between 2003 and 2004. We track their health care use from the first day after 2nd birthday to the first day of 4th birthday (2*365 days). Thus, we use NHID data between 2005 and 2008. TWCMS was implemented in 2002. There is a change in the reimbursement rate in 2009
for young children. We exclude
Dental services and Chinese medicine, focusing on Western Medicine
Health checks provided free by NHI Children who enrolled into NHI for only one year Already waived from cost-sharing (e.g. indigenous
families)
Children Characteristics After Sample Selection
(1) (2) (3)Original Sample Continuous enrollment Eliminating
at age two and three cost-sharing waiver
Male Birith year: 2003 Birith year: 2004 1st birth 2nd birth 3rd birth (above) Number of siblings
Number of children
Selected characteristics at age three before and after sample selectionTable2:
0.5250.5100.4900.5190.3680.1131.761(0.671)435,206
0.5250.5090.4910.5200.3700.1121.760(0.671)426,587
0.5240.5090.4910.5200.3700.1101.759(0.669)410,517
Sample Statistics of Health Care Use
Before After Before After3rd birthday 3rd birthday 3rd birthday 3rd birthday
UtilizationAverage annual visits Average out-of-pocket cost per visit (NT$)Average medical expenditure per visit (NT$)Choice of providersMajor Teaching Hospital Minor Teaching Hospital Community Hosptial Clinic Number of children (visits > 0)Number of children-visit
Outpatient care Inpatient careDescriptive Statistics
Table3:
19.8 1958.9 123.1443.5 438.7
4.1% 2.3%5.6% 3.7%3.8% 4.6%86.5% 89.4%
375,493 364,0752,003,097 1,954,591
0.14 0.130 1289.7
12980.6 13013.9
28.7% 29.8%58.6% 58.2%12.8% 11.9%
0% 0%13,252 12,66619,356 18,163
Empirical Specification
We estimate the following RD regression:
is the outcome of interest for the child i outpatient visits or inpatient admissions total spending on outpatient or inpatient care
is an indicator equaling to one if i is age 3 or older is smooth function of age with parameter vector
that accommodate the age profile of outcome variables is an error term that reflects all other factors
affecting outcome variables represents the causal effect of cost sharing on
children‘s health care spending and use
Empirical Specification Problems (I)
A large portion of children do not have health care use with a short period of time Many zeros result in a huge problem in the
estimation (e.g. cannot take log) In the health literature, two-part model is
proposed to deal with the problem of many zeros. Here, we collapse the health care use of all
children in the sample together so that we can measure the health care use by days
Empirical Specification Problems (II)
Children might visit doctors more in face of the ending of subsidy program Check if our estimates are robust when dropping
points very close to the 3rd birthday
Change in # of Visits at the 3rd Birthday (Outpatient)
500
520
540
560
580
600
Out
patie
nt v
isits
per
10,
000
per
son
yea
rs
-180 -150 -120 -90 -60 -30 0 30 60 90 120 150 180Age at visits (days from 3rd birthday)
Empirical Specification Problems (III)
Separate the sharp jump from non-linear functional forms
Lee and Lemieux (2010) suggests two ways to estimate parameters of interest in RD design polynomial regression: estimating age profile using all of
available data and a parametric function (e.g., 3th order polynomial)
local linear regression: estimating the age profile over a narrower range of data (choosing specific bandwidth) by using linear regression
We will use local linear regression as the main specification, and global polynomial regression as the robustness check
Results: Outpatient Visits and Spending
(1) (2) (3) (4)Specication Nonparametric Parametric Nonparametric Parametric
Local linear Cubic spline Local linear Cubic spline
Visits rate at age 2(per 10,000 person-years)Bandwidth (days)
Panel A:Log( outpatient expense)After 3rd birthday (X100) Panel B:Log(number of visits)After 3rd birthday (X100) Panel C:Log(outpatient expense per visit)After 3rd birthday (X100)
2005-2008 1997-2001Change at 3rd birthday in Outpatient Visits and Spending: before and after reform
Table4:
542 90 365
-6.63*** -6.79*** [0.44] [0.40]
-4.54*** -4.67*** [0.32] [0.29]
-2.12*** -2.12*** [0.26] [0.27]
568 90 365
0.17 0.36 [0.24] [0.21]
0.26 0.24 [0.17] [0.17]
-0.04 0.11 [0.11] [0.13]
Change in Outpatient Expenditure for Young Children
Change in the Number of Visits for Young Children
Average Expenditure Per Visit for Young Children
(1) (2) (3) (4)Specication Baseline Different Different Donut
Bandwidth Kernel RDBandwidth (days) 90 180 90 90Kernel function triangular triangular unifrom triangularPanel A:Log( outpatient expenditure)After 3rd birthday (X100) -6.63*** -5.97*** -6.61*** -6.26*** [0.44] [0.31] [0.38] [0.82]Panel B:Log(number of visits)After 3rd birthday (X100) -4.54*** -3.78*** -4.52*** -4.90*** [0.32] [0.22] [0.28] [0.45]Panel C:Log(outpatient expense per visit)After 3rd birthday (X100) -2.12*** -2.19*** -2.09*** -1.36**
[0.26] [0.21] [0.27] [0.60]
Robustness Check for Outpatient Expenditure and VisitsTable 12:
Robustness Checks
Summarized Results
The estimated arc-elasticity for outpatient care Health spending: -0.10 Health visits: -0.06
Average expenditure per visit also dropped for 2%, after the end of subsidy. But why? The subsidy program encourages the children to
go to teaching hospitals for ordinary diseases.
(1) (2) (3) (4) (5)All Major teachingMinor teaching Community Clinic
hospital hospital hospitalPanel A: Outpatient visitVisits rate at age 2 542 22 30 21 469(per 10,000 person-years)Log(number of visits)After 3rd birthday (X100) -4.54*** -57.64*** -44.03*** 18.97*** -1.61***
[0.32] [2.40] [1.47] [1.48] [0.26]Log(outpatient expense per visit)After 3rd birthday (X100) -2.12*** 19.07*** 7.13*** -0.75 -0.18**
[0.26] [2.34] [1.75] [1.56] [0.09]Panel B:Emergency room visitVisits rate at age 2(per 10,000 person-years)Log(number of visits)After 3rd birthday (X100)
Log(outpatient expense per visit)After 3rd birthday (X100)
Providers
Change at 3rd birthday in Outpatient Visits and Spending: By choice of providersTable5:
16 6 8 2 0
-5.31*** -9.48*** -12.57*** 32.09*** [1.49] [2.46] [1.58] [3.97]
0.52 0.95 2.24* -3.13 [0.66] [1.64] [1.33] [2.40]
Change in # of Visits for Young Children by Providers
Change in # of Visits for Young Children by Providers
Table7:
(1) (2) (3) (4)Specication Nonparametric Parametric Nonparametric Parametric
Local linear Cubic spline Local linear Cubic spline
Visits rate at age 2(per 10,000 person-years)Bandwidth (days)
Panel A:Log(inpatient expense)After 3rd birthday (X100) Panel B:Log(number of admission)After 3rd birthday (X100) Panel C:Log(inpatient expense per admission)After 3rd birthday (X100)
2005-2008 1997-2001Change at 3rd birthday in Inpatient Expenditure and Admissions: before and after reform
3.9
90 365
-0.11 -1.20 [2.78] [2.41]
-0.10 0.74 [5.15] [4.00]
0.01 0.19 [3.45] [3.03]
2.5
90 365
1.14 3.21 [2.38] [2.20]
1.36 2.72 [2.89] [3.13]
0.04 -0.04 [2.36] [2.48]
Summarized Results
The estimated arc-elasticity is insignificant for inpatient care Admissions: -0.0005 Expenditure: -0.0005
In other words, the demand of inpatient care for young children barely responds to the change of cost sharing
Heterogeneous Treatment Effect
The treatment effect could vary with respect to Gender Birth order Household incomes Diseases
and gender(1) (2)
Visits rate at age 2 Log of visits
(per 10,000 person-years)
Panel B: By birth order1st birth 2nd birth (above) Panel C: By genderMale Female Panel D: By household incomeLow High
Change at 3rd birthday in Outpatient Visits : By diagnoses, household income, birth order,Table6:
535 -4.15*** [0.37]
549 -4.95*** [0.40]
570 -4.68*** [0.35]
511 -4.29*** [0.51]
525 -5.23*** [0.38]
562 -3.77*** [0.43]
(1) (2)Visits rate at age 2 Log of visits
(per 10,000 person-years)Panel A: By visit diagnosesURI 119 -1.89*** [0.53]Skin diseases 20 -11.82***
[1.18]Mental disorder 4 -23.61*** [2.80]Preventive care 2 -33.28*** [5.47]
come, birth order, and genderChange at 3rd birthday in Outpatient Visits and Spending: By diagnoses, in-
Table6:
Conclusion
Our study is the first one to identify the demand elasticity of health care for young children.
Our results show The price elasticity for outpatient expenditure is
about -0.1. The price elasticity for outpatient visit is about -0.06. The price elasticity for inpatient service is very small,
almost zero The price elasticity for preventive care or mental
illness is quite large while that for URI is small. Further work
The long term health effects
Recommended