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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ABSTRACT: We examined the impact of a $5 office visit copayment on use of preventive care services by Washington State enrollees in a health maintenance organization. Utilization data were compared for 30,415 State enrollees and 21,633 enrollees without copayments who were enrolled 12 months before and after the start of copayments. Copayments resulted in a 14% decrease in physical examinations but did not significantly affect immunization rates for young children, cancer screening tests received by women, or medication use by persons with cardiovascular disease. For employed populations small copayments appear to have little impact on the most valuable types of preventive care services.Inquiry: a journal of medical care organization, provision and financing 02/1990; 27(1):24-38. · 0.84 Impact Factor
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ABSTRACT: This study examines the effects both of introducing and of removing copayment charges under a universal public medical care and hospital insurance program. For a period between 1968 and 1971, the Province of Saskatchewan imposed user charges of approximately 33 per cent and 6 per cent on medical and hospital services, respectively. The effects of these charges are analyzed using pooled cross-section samples of families and using both multivariate methods and experimental/control groups designs. Diagnostic- and procedure-specific analysis is also performed on the hospital data using the individual as the unit of observation. The findings of the study indicate a copayment effect of 5.6 per cent for physicians' services. No evidence could be adduced that would support the conclusion of a copayment effect for hospital services.Medical Care 09/1980; 18(8):787-806. · 3.23 Impact Factor
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ABSTRACT: This study examines the extent to which people forego seeking primary health care due to the cost and to investigate the associated demographic, physical, psychological and social factors. In 1995, questionnaires were sent to a random sample of the population in two healthcare regions in the Stockholm area in Sweden covering a total of about 400 000 inhabitants. Among the sample of 8200 people over the age of 17 yr, 69% replied to the questionnaire. About 22% stated that on one or more occasions during the past year they had foregone seeking care due to the cost. About 30% stated that they had foregone or hesitated seeking medical help due to the cost during the past year. This applied to women to a greater extent than men. Not seeking medical care was strongly correlated to a self-assessment of personal finances. Among those who described their financial situation as poor, more than half stated that, on at least one occasion, they had foregone seeking medical care due to the cost. As a consequence, weaker groups in society such as the unemployed, students, foreign nationals and single mothers were overrepresented in this group. Those who had foregone care perceive their health as worse and they had a greater degree of general pains and a higher occurrence of chronic disease/disability compared to those who had not foregone care. Between 1970 and 1995, patient charges for consulting a general practitioner within Stockholm County have increased more than three times faster than the consumer price index. The results suggest that the rapidly increasing patient charges particularly affect the weaker social groups and thus pose a threat to the aim of Swedish healthcare legislation — that good care should be available to everyone on equal terms.Social Science [?] Medicine 06/1998; · 2.73 Impact Factor
Electronic copy available at: http://ssrn.com/abstract=1118305
Deutsches Institut für
Jonas Schreyögg • Markus M. Grabka
Berlin, April 2008
Copayments for Ambulatory Care in
A Natural Experiment Using a Difference-in-
Electronic copy available at: http://ssrn.com/abstract=1118305
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Electronic copy available at: http://ssrn.com/abstract=1118305
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,
2. Center for Health Policy/Center for Primary Care and Outcomes Research,
Stanford University, USA
3. DIW Berlin, German Socio-Economic Panel (SOEP), Germany
Berlin University of Technology
Department for Health Care Management
Strasse des 17. Juni 135 (H65)
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-
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).
individuals, such as poor or disabled persons, or those with chronic disease, to avoid
seeking necessary care.
In this study we aimed to evaluate the effects of this reform. In particular, we analysed
whether the reform has had an impact on the demand for ambulatory physician services
while retaining the necessary and desirable demand of vulnerable groups. The reform can
be regarded as a natural experiment, because privately insured individuals are fully
exempt from the copayments. Thus, within the framework of this natural experiment, we
used a difference-in-difference approach, comparing the demand for physician visits
before and after the reform among individuals with SHI and those with private insurance.
At the same time, we examined the effects of the reform on vulnerable groups.
2. Copayments for ambulatory care in the German health care system
The German health care system is dominated by statutory heath insurance (SHI), which is
financed primarily by mandatory payroll deductions. Nearly 88% of the population is
covered by comprehensive SHI. Beyond a certain income threshold, employees can
decide either to remain in the SHI or to obtain private health insurance (PHI) instead.
Self-employed persons can always choose between SHI and PHI. Approximately 6% of
the population is fully covered by PHI. Another 6%, including civil servants, pensioners,
or their families, are covered by governmental schemes (GS). All persons insured under
SHI, PHI, or GS have access to a comprehensive benefit catalogue covering hospital
services, ambulatory visits, pharmaceuticals, medical aids, etc. Ambulatory services
include visits to general practitioners, specialists, and dentists. Before 2004, patients with
SHI were not required to make copayments for ambulatory physician visits. However,
other types of copayments have a long tradition in the SHI system. Copayments are
required, for example, for prescription drugs, hospital care, or health care-related
transportation. These copayments have not had a substantial impact on the demand for
health care services, and can thus be described as having a pure funding effect.
As part of the Statutory Health Insurance Modernization Act, copayments for doctor
visits were introduced with effect from 1 January 2004. One copayment of €10 per
calendar quarter is paid by patients upon their first visit to a physician’s office.
Subsequent visits to the same physician during the same quarter do not require a
copayment. Similarly, visits to other physicians during the same quarter do not require a
copayment if the patient presents a referral from the first physician. However, patients
who visit another physician during the same quarter without a referral by the first
physician must make an additional copayment of €10. Thus, if a patient always presents a
referral from the first physician, the total fee will be €10 per quarter.
This new copayment regulation was fully applied only to persons covered by SHI.
Persons with PHI and some individuals with GS are exempt from the regulation. Children
and adolescents up to the age of 18 who are covered by SHI are excluded, as well. In
order to reduce the financial burden of the various copayments, individuals covered by
SHI who have spent more than 2% of their gross household income per annum on
copayments of any kind (e.g. for pharmaceuticals) are eligible for exemption from the
physician fee. This also applies to SHI members with chronic conditions once they have
spent more than 1% of their gross household income per annum on copayments of any
kind (the so-called 1% rule). Figure 1 summarizes the application of the copayments
according to insurance status.
Figure 1. Application of copayments according to insurance status
PHI GS SHI below 18 SHI with chronic conditions and/or low income SHI others
Source: own figures based on data from the German Federal Ministry of Health (2007), Association of
Private Health Insurance (2007), and a Federal Ministry of Health estimate of SHI members with chronic
conditions and/or low income. Displayed groups do not add up to 100% because 0.2% of the population is
Based on economic theory, as well as on experiences with previous health care reforms in
Germany and elsewhere, one would expect the introduction of copayments for
ambulatory care to lead to a decline in the number of physician visits. Most previous
studies on natural experiments in this area have been conducted in the US and Canada,
and suggest that copayments in ambulatory care are an effective way to reduce the
number of physician visits. Cherkin et al (1990) showed that a copayment of
approximately US$5 resulted in a 14% decrease in physical examinations. Scitovsky and
McCall (1977) found an even stronger effect, with the introduction of a 25% coinsurance
provision leading one year later to approximately 24% fewer physician visits. Although
the authors also argued that this was potentially a short-lived effect that could fade over
time, the results of a follow-up study showed evidence that the number of doctor visits
either remained much the same or was even slightly lower.
Although copayments have frequently been found to be effective in reducing the number
of physician visits, they can also act as a deterrent to vulnerable groups if the system of
copayments is not carefully designed (i.e. if the rules for exemption do not have the
intended effect). There is substantial evidence from countries other than Germany that a
change in copayments can discourage vulnerable groups from seeking necessary care. In
a study described by Roemer et al (1975), only short-term effects could be observed.
Imposing user charges of approximately US$1 for the first two doctor visits initially
reduced demand for physician services, but led over the long-term to levels higher than
those observed in the control group, thus offsetting any savings. The long-term effects of
copayments were also analysed by Beck and Horne (1980) for members of a universal
public medical care and hospital insurance programme in Canada. Between 1968 and
1971, the Province of Saskatchewan imposed user charges of approximately 33%.
Although this clearly reduced the number of physician visits, the findings of the study
showed that it was primarily elderly and low-income individuals who had been affected.
Moreover, when considering substitution effects, the authors concluded that the reform
had not led to significant cost savings. This finding was complemented by Manning et al
(1987), who showed that a reduction in the use of physician services can also be
accompanied by increased treatment intensity in the form of longer or more expensive
treatment episodes. In a Swedish study presented by Elofsson et al (1998), costs appeared
to be the main barrier to seeking care. Roughly 22% of all respondents within a random
sample of individuals aged 17 or above stated that copayments had caused them to forgo
a doctor’s visit at least once during the previous year. This decision was strongly
associated with poor financial circumstances. Among those who assessed their financial
situation to be poor, the probability of foregoing care was 10 times higher than among
those who assessed their financial situation to be fair or good. However, among women,
avoiding physician visits was also associated with chronic disease.
Winkelmann (2004) examined whether increased copayments for prescription drugs in
Germany, a measure introduced as part of an earlier health care reform in 1997, had
indirect effects on the number of physician visits. Since prescriptions are issued by
physicians, Winkelmann argued that the demand for prescription drugs and the demand
for physician visits are intrinsically linked. He concluded that increased copayments
reduced the number physician visits by approximately 10% on the average.
Our study adds to earlier approaches by conceptually dividing the copayment effect into
two effects. Firstly, a person may want to avoid making a copayment for the first visit per
quarter and thus not visit any physician at all during that quarter. Secondly, a person may
reduce the number of physician visits after the first visit due to the increased transaction
costs of obtaining the necessary referrals. Consequently, we investigated whether (a) the
probability of visiting a physician has decreased and (b) the demand for physician visits
declined among non-exempt SHI members since the introduction of copayments
compared to the PHI members as our control group. We also investigated whether
vulnerable groups such as members of the SHI with chronic conditions or low income
have shown lower demand for physician visits since the introduction of copayments
compared to our control group.
3. Data and methods
The primary data source in this study is the German Socio-Economic Panel (SOEP) (see
Wagner et al 2007). Initiated in 1984, the SOEP is a representative longitudinal survey of
approximately 22,000 individuals aged 16 and above living in private households. Part of
the core questionnaire, which is administered each year, gathers data on health-related
variables such as current health status, insurance status, and health care utilization (e.g.
number of physician visits over the past 3 months). Because 2004 was the year of the
intervention, we used data from the pre-intervention years 2000-2003 and the post-
intervention years 2005-2006. We excluded all individuals under the age of 18, as well as
GS members, from the dataset, because it seemed likely that the age restriction and
changes to the reimbursement system of the GS during the post-reform period would
make these groups unsuitable as controls. As a result, only data on PHI members, and on
SHI members over the age of 18, remained in the dataset.
Our study approach was to pool the data from the abovementioned 5 years (i.e. from
2000-2003 and 2005-2006) and to estimate the effects of copayments by comparing the
expected number of physician visits before and after the intervention using a difference-
in-difference (DID) approach (Blundell and Costa Dias, 2002; Wooldridge, 2002). Few
studies have used a DID approach to measure the effects of changes in copayment
(Winkelmann, 2004; Zhang, 2007). In the present study, we used the following model:
where is the outcome variable for person at time .
i x is the treatment vector
indicating whether person is subject to the increased copayment, while
occurrence of the copayment in period . The interaction term denotes the utilization of a
person who was required to make a copayment after the new copayment came into effect.
The vector represents a variety of socio-economic characteristics that we controlled
We constructed 4 DID estimators, each of which was related to a pre-post change in
physician visits. Firstly, we compared non-exempt SHI members to PHI members to
explore whether the introduction of copayments had led to a general reduction in the
demand for physician visits. Secondly, the group of SHI members with chronic
conditions was compared to the group of PHI members to investigate whether vulnerable
groups had been affected by the copayment reform. We followed the official definition of
‘chronic condition’, based upon which affected individuals can qualify for the so-called
1% rule. We included persons with approved disability of more than 60% or who had
qualified as beneficiaries of long-term care insurance (grades II or III). It should be
pointed out here that there may be other persons who qualify for exemption based on
individual conditions that could not be captured in this study. Thirdly, we sought to
define a group of persons with low income whose total copayments (for ambulatory care
and other services) most likely exceeded the threshold of 1% or 2% of gross household
income per annum. Thus the lowest income quintile was taken as a proxy for SHI
members with low income and compared to PHI members. Finally, as an alternative
proxy for low income we included all persons who received public welfare benefits and
compared this group to the group of PHI members. Public welfare recipients are not
generally exempt from copayments in the SHI in Germany, but given their relatively low
transfer income, copayments can easily exceed the 1% income threshold. However, as
long as the transfer income of these individuals does not exceed the income threshold,
one may assume a significant decline in the demand for physician visits.
Throughout the models, we controlled for a number of variables reflecting socio-
economic characteristics, including gender, age, age-squared, existence of children in
household (i.e. implying additional time and effort when consulting a physician),
employment status (i.e. full-time, part-time, or unemployed), self-employment,
educational level, resident of former East or West Germany, active sports, smoker,
household income in quintiles and population at residence location. In addition, we
controlled for health by including a variable on self-reported health based on the
categories very good, good, fair, poor, and very poor. Variables for years and months
were used to control for all other unobserved temporal factors affecting demand for
physician visits. Controlling for months is particularly important in this context, because
interviews take place in different months of the year and seasonal influences such as
influenza during the winter months may otherwise bias the results. A descriptive
overview of the sample is given in the appendix.
To model the impact of the copayment regulation, we proceeded in two steps. Firstly, we
used a probit model to evaluate whether the probability of visiting a physician had
decreased following the introduction of copayments. In this model, the outcome variable
takes the value of 1 if the person has visited a physician and 0 if not. As can be seen in
figure 2, the percentage of individuals who visited a physician during the past 3 months
has decreased slightly over the last 10 years (i.e. from approximately 72% to less than
69% in 2006). However, the introduction of the copayment in 2004 appears to have had
no impact on the demand for physician visits.
Figure 2. Percentage of individuals who had visited a physician during the past 3 months
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: SOEP, including all groups.
Secondly, when choosing an appropriate econometric model to examine whether the
number of physician visits declined after the introduction of copayments, we had to
consider that the distribution of our dependent variable ‘number of physician visits’ was
largely skewed to the right and contained a large proportion of zeros. Figure 2 displays
the kernel densities for the entire sample (i.e. including all groups). Probit or logit models
would most likely have produced inefficient estimates in this context. Several estimation
techniques have been proposed in the literature to deal with distributional characteristics
like these. Among them are Poisson and negative binomial (NB) models, as well as zero-
inflated Poisson (ZIP) and zero-inflated negative binomial (ZINB) models (Sheu et al,
2004; Yau et al, 2003).
Figure 3. Number of physician visits during the past 3 months
Number of physician visits
Source: SOEP, pooled information for the years 2000-2003 and 2005-2006.
We started with a basic Poisson model where the number of physician visits y for
individual has a Poisson distribution with a conditional mean
λ depending on the
individual characteristics x:
E y xe