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Patient Copayments, Provider Incentives, and Income Effects: Theory and Evidence From the Essential Medications List Under China's 2009 Healthcare Reform

Expanding access through insurance expansion can increase healthcare utilization through moral hazard. Reforming provider incentives to introduce more supply-side cost sharing is increasingly viewed as crucial for affordable, sustainable access. Using both difference-in-differences and segmented reg... Full description

Journal Title: World Medical & Health Policy March 2017, Vol.9(1), pp.24-44
Main Author: Chen, Brian K.
Other Authors: Yang, Y. Tony , Eggleston, Karen
Format: Electronic Article Electronic Article
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ID: ISSN: 1948-4682 ; E-ISSN: 1948-4682 ; DOI: 10.1002/wmh3.222
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recordid: wj10.1002/wmh3.222
title: Patient Copayments, Provider Incentives, and Income Effects: Theory and Evidence From the Essential Medications List Under China's 2009 Healthcare Reform
format: Article
creator:
  • Chen, Brian K.
  • Yang, Y. Tony
  • Eggleston, Karen
subjects:
  • China
  • Pharmaceuticals
  • Essential Medications List
ispartof: World Medical & Health Policy, March 2017, Vol.9(1), pp.24-44
description: Expanding access through insurance expansion can increase healthcare utilization through moral hazard. Reforming provider incentives to introduce more supply-side cost sharing is increasingly viewed as crucial for affordable, sustainable access. Using both difference-in-differences and segmented regression analyses on a panel of 1,466 hypertensive and diabetic patients, we empirically examine Shandong province's initial implementation of China's 2009 Essential Medications List policy. The policy reduced drug sale markups to providers but also increased drug coverage benefits for patients. We find that providers appeared to compensate for lost drug revenues by increasing office visits, for which no fee reduction occurred. At the same time, physician agency (yielding to patient demand for pharmaceuticals) may have tempered provider incentives to reduce drug expenditures at the visit level. Taken together, the policy may have increased total spending or total out-of-pocket expenditures. Mandating payment reductions in a service that comprises a large portion of provider income may have unintended consequences.
language:
source:
identifier: ISSN: 1948-4682 ; E-ISSN: 1948-4682 ; DOI: 10.1002/wmh3.222
fulltext: fulltext
issn:
  • 1948-4682
  • 19484682
url: Link


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descriptionExpanding access through insurance expansion can increase healthcare utilization through moral hazard. Reforming provider incentives to introduce more supply-side cost sharing is increasingly viewed as crucial for affordable, sustainable access. Using both difference-in-differences and segmented regression analyses on a panel of 1,466 hypertensive and diabetic patients, we empirically examine Shandong province's initial implementation of China's 2009 Essential Medications List policy. The policy reduced drug sale markups to providers but also increased drug coverage benefits for patients. We find that providers appeared to compensate for lost drug revenues by increasing office visits, for which no fee reduction occurred. At the same time, physician agency (yielding to patient demand for pharmaceuticals) may have tempered provider incentives to reduce drug expenditures at the visit level. Taken together, the policy may have increased total spending or total out-of-pocket expenditures. Mandating payment reductions in a service that comprises a large portion of provider income may have unintended consequences.
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