Copayments for Ambulatory Care in Germany: A Natural Experiment Using a Difference-in-Difference Approach

Abstract

This paper focuses on the switching behaviour of enrolees in the Swiss basic health insurance system. Even though the new Federal Law on Social Health Insurance (LAMal) was implemented in 1996 to promote competition among health insurers in basic insurance, there is limited evidence of premium convergence within cantons. This indicates that competition has not been effective so far, and reveals some inertia among consumers who seem reluctant to switch to less expensive funds. We investigate one possible barrier to switching behaviour, namely the influence of supplementary insurance. We use survey data on health plan choice (a sample of 1943 individuals whose switching behaviours were observed between 1997 and 2000) as well as administrative data relative to all insurance companies that operated in the 26 Swiss cantons between 1996 and 2005. The decision to switch and the decision to subscribe to a supplementary contract are jointly estimated.
Our findings show that holding a supplementary insurance contract substantially decreases the propensity to switch. However, there is no negative impact of supplementary insurance on switching when the individual assesses his|her health as 'very good'. Our results give empirical support to one possible mechanism through which supplementary insurance might influence switching decisions: given that subscribing to basic and supplementary contracts with two different insurers may induce some administrative costs for the subscriber, holding supplementary insurance acts as a barrier to switch if customers who consider themselves 'bad risks' also believe that insurers reject applications for supplementary insurance on these grounds. In comparison with previous research, our main contribution is to offer a possible explanation for consumer inertia. Our analysis illustrates how consumer choice for one's basic health plan interacts with the decision to subscribe to supplementary insurance. Copyright � 2009 John Wiley & Sons, Ltd.</P

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Electronic copy available at: http://ssrn.com/abstract=1118305
Deutsches Institut für
Wirtschaftsforschung
www.diw.de
Jonas Schreyögg • Markus M. Grabka
Berlin, April 2008
Copayments for Ambulatory Care in
Germany:
A Natural Experiment Using a Difference-in-
Difference Approach
777
Discussion Papers

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Electronic copy available at: http://ssrn.com/abstract=1118305



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Copayments for Ambulatory Care in Germany:
A Natural Experiment Using a Difference-in-Difference Approach

Jonas Schreyögg1,2 and Markus M. Grabka3


1. Department for Health Care Management, Berlin University of Technology,
Germany
2. Center for Health Policy/Center for Primary Care and Outcomes Research,
Stanford University, USA
3. DIW Berlin, German Socio-Economic Panel (SOEP), Germany



Corresponding author:
Jonas Schreyögg
Berlin University of Technology
Department for Health Care Management
Strasse des 17. Juni 135 (H65)
10623 Berlin
Germany
jonas.schreyoegg@tu-berlin.de
Phone: +49-30-314-28420
Fax: +49-30-314-28433

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Abstract


In response to increasing health expenditures and a high number of physician visits, the
German government introduced a copayment for ambulatory care in 2004 for individuals
with statutory health insurance (SHI). Because persons with private insurance were
exempt from the copayments, this health care reform can be regarded as a natural
experiment. We used a difference-in-difference approach to examine whether the new
copayment effectively reduced the overall demand for physician visits and to explore
whether it acted as a deterrent to vulnerable groups, such as those with low income or
chronic conditions. We found that there was no significant reduction in the number of
physician visits among SHI members compared to our control group. At the same time,
we did not observe a deterrent effect among vulnerable individuals. Thus, the copayment
has failed to reduce the demand for physician visits. It is likely that this result is due to
the design of the copayment scheme, as the copayment is low and is paid only for the first
physician visit per quarter.



JEL classification: C13; I18; L31


Keywords: copayments, ambulatory care, difference-in-difference, count data, zero-
inflated-model

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1. Introduction
In many industrialized countries, health expenditures account for a substantial share of
GDP and are increasing more rapidly than GDP in a considerable number of cases.
Between these countries, however, there are large differences with respect to the share of
health expenditures in GDP. Germany has the third-highest share of health expenditures
among OECD countries. One of the more likely reasons for this can be found in the
moral hazard inherent in public health care systems. Indeed, looking at the demand for
ambulatory care in Germany, it is striking that the average person made 10.0 physician
visits per year in 2006,1 whereas this same figure was 7.8 for all European countries and
6.8 for the EU (World Health Organization 2008).

To help counter increasing health expenditures and the high number of physician visits,
the German government introduced a copayment of €10 per calendar quarter to be paid
by individuals covered under statutory health insurance (SHI) upon their first contact
with a physician’s or dentist’s office. The legislation came into effect on 1 January 2004
and has attracted attention in many European countries, leading to discussions about
introducing similar schemes. Like earlier attempts to reform the German health care
system, the introduction of copayments for ambulatory care aimed at tackling the moral
hazard problem. Exemption rules based on income and chronic disease status were
defined as a way to avoid a deterrent effect that might cause certain vulnerable

1 In the absence of WHO data for Germany, we have used data on the number of physician contacts,
provided by the German Socio-Economic Panel (SOEP) for the year 2006. According to a study based on
claims data from one of the largest German sickness funds, the average person in Germany makes as many
as 16.3 physician visits annually (Gmünder Ersatzkasse 2006).
1