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Abstract

We examine the interaction in the market for physician services when the total budget for reimbursement is fixed. Physicians obtain points for the services they render. At the end of the period the budget is divided by the sum of all points submitted, which determines the price per point. We show that this retrospective payment system involves -- compared to a fee-for-service remuneration system -- a severe coordination problem, which potentially leads to the "treadmill effect". We argue that when market entry is possible, a budget can be efficiency enhancing, if in addition a price floor is used.

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... The incentive problem is particularly pronounced in a feefor-service system. Theoretically, a budgetary target broken down to the individual service provider can break this incentive structure [15,21,[27][28][29][30][31]. ...
... Since the first introduction of budgetary ceilings for practicing doctors in the late 1990s, there have been several reforms of the remuneration scheme to incentivize cost containment, to tackle the common-pool problem of global budgets ("treadmill effect"), to prevent rationing and to satisfy doctors' expectations in terms of income and working conditions [27,44]. This ongoing reform-process led to the introduction of the doctor-specific standard service volume in 2009, which, in contrast to the preceding practice budget, not only defines a certain volume ceiling but also guarantees remuneration of this volume with fixed point values and thus represents a fixed global budget [43]. ...
... Secondly, the stricter budget target incurred losses among doctors in the first year in Nova Scotia. This triggered aẗreadmill effectämong doctors as in Germany [27]. Conversely, a lengthier transition phase in Alberta favoured the ability to reach consensus on budget targets. ...
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Growing healthcare expenditure is a major concern for policy makers and calls for effective cost containment measures. For the decentralized Swiss healthcare system, ranking second among OECD countries in healthcare spending, a group of experts has proposed budgetary targets as key measure. In order to substantiate this proposal, we review the literature and analyse experiences with budgetary targets in comparable social health insurance systems, such as Germany and the Netherlands. Budgetary targets raise the cost responsibility and prompt providers to give greater weight to cost-benefit considerations. Our analysis suggests that the involvement of all principal healthcare players and clear decision-making and negotiating structures are key to successful implementation. Risks of rationing, lower quality incentives or conservation of structures have to be countered with taking into account age-related morbidity and medical progress when setting the budgetary targets. Accompanying measures such as incentive-compatible remuneration schemes and quality monitoring are of paramount importance.
... Hence, point values in Euro differed per region and time. The budget keeps the overall costs stable for the social health insurance, however, it cannot contribute to a reduction of medical services by physicians, as Benstetter and Wambach (2006) show theoretically. In contrast, a single physician still can increase his income, for instance by increasing the duration of treatments. ...
... Points exceeding the practice budget were reimbursed by a much lower point value. The point value stabilised after the reform (see Benstetter and Wambach, 2006). Since 1999, the budget for ambulatory care may not rise faster than labour's share in national income in Germany. ...
... Altogether this led to a real reduction of the budget after 2000. Given the incentives induced by the reform of 1993 and the theoretical considerations of Benstetter and Wambach (2006), a decrease in the number doctor visits cannot be expected after the introduction of the fixed budget. But the reform in July 1997 can be expected to have an effect on the physician's behaviour. ...
Article
Recent studies only find weak evidence that demand-side instruments (like co-payments and deductibles) can increase efficiency and contribute to cost-containment in the German health-care sector. This study provides evidence, that supply-side regulation (i.e., on the physician's side) might be a much more efficient instrument to contain costs. We analyse the effect of the introduction of a fixed budget for the ambulatory sector in 1993 and the introduction of individual practice budgets in 1997 on the lengths of treatments of patients (measured as numbers of doctor visits) using data from the German Socio-Economic Panel over the period from 1985 to 2006. With a random effects-type two-part model in a difference-in-differences setting, we find evidence that the reforms did not change the patient's behavior (and access to health care) but that especially the introduction of individual practice budgets in 1997 reduced the treatment durations.
... The fixed budget was introduced in order to keep the overall costs stable for the social health insurance system. However, it cannot contribute to a reduction of medical services by physicians, as Benstetter and Wambach (2006) show theoretically. For instance, a single physician can still increase her income by increasing the duration of treatments. ...
... This is called the "treadmill effect". Indeed, the point value declined after 1993 (Benstetter and Wambach, 2006). This, however, was not due to an increasing number of physician visits but due to the fact that physicians charged much more services during a treatment, especially doctor's advice. ...
... Points exceeding the practice budget were reimbursed by a much lower point value. The reform was successful in stabilising the point value (see Benstetter and Wambach, 2006). Since 1999, the budget for ambulatory care may not rise faster than the payroll tax base in Germany. ...
Article
We analyse the effect of a change in the remuneration system for physicians on the lengths of treatments of patients as measured by the number of doctor visits using data from the German Socio-Economic Panel over the period 1988- 2003. In particular, we analyse the introduction of a fixed budget for the ambulatory sector in 1993 and the introduction of individual practice budgets in 1997 for the publicly insured. With a random-effects-type two-part model, we find evidence that the reforms did not change the patients' behaviour (and access to health care) but that the introduction of individual practice budgets in 1997 reduced the treatment durations of the publicly insured. At the same time, treatment durations increased for the privately insured. This can be seen as evidence that physicians respond to the change in incentives induced by the reform.
... First, the GBPS could be inferior to the PPS because given the same medical expenditure, the GBPS would fail to achieve the first-best allocation (in terms of optimal quality-enhancing and cost-reducing efforts that allow the government to maximize social welfare) that can be achieved by the PPS [10]. Second, the GBPS would cause the so-called treadmill effect, describing a phenomenon whereby healthcare providers provide more healthcare services with a lower unit reimbursement payment under the GBPS [11]. The cause of the treadmill effect is that the GBPS creates the need for providers to collectively coordinate total quantities but also provides an incentive for each hospital not to cooperate since a provider gains the most by increasing its volume of healthcare service while all others do not [12,13]. ...
... Previous theoretical studies of hospital behavior under the GBPS assumed that the hospital's objective is to maximize its profit, implying that cost minimization is operated [9][10][11]. Although Fan et al. [9] and Benstetter and Wambach [11] discuss physicians' behaviors under the GBPS, their results can be applied, directly for hospitals' behavior under the GBPS if a hospitals objective is to maximize their profit [9,11]. ...
... Previous theoretical studies of hospital behavior under the GBPS assumed that the hospital's objective is to maximize its profit, implying that cost minimization is operated [9][10][11]. Although Fan et al. [9] and Benstetter and Wambach [11] discuss physicians' behaviors under the GBPS, their results can be applied, directly for hospitals' behavior under the GBPS if a hospitals objective is to maximize their profit [9,11]. However, this assumption has been questioned in the analyses of hospital behavior since not-for-profit hospitals dominate the world health market. ...
Article
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This paper provides theoretical analyses of two alternative hospital payment systems for controlling medical cost: the Global Budget Payment System (GBPS) and the Prospective Payment System (PPS). The former method assigns a fixed total budget for all healthcare services over a given period with hospitals being paid on a fee-for-service basis. The latter method is usually connected with a fixed payment to hospitals within a Diagnosis-Related Group. Our results demonstrate that, given the same expenditure, the GBPS would approach optimal levels of quality and efficiency as well as the level of social welfare provided by the PPS, as long as market competition is sufficiently high; our results also demonstrate that the treadmill effect, modeling an inverse relationship between price and quantity under the GBPS, would be a quality-enhancing and efficiency-improving outcome due to market competition.
... Although rejected in the United States then, the idea has become a key element in payment reforms around the world (e.g. France- [3]; Taiwan- [4][5][6]; Germany- [7]. In 2010, it became one of the central pillars of Medicare's Alternative Payment Reform and, as a pilot study, implemented in the state of Maryland. ...
... One strand of literature focusing on systems with ex post price adjustment and regional-or sectoral-level budget allocation has found an increase in healthcare utilization as a result of the policy. This unanticipated result was found in two provinces in Canada [14], in German ambulatory care [7] and most recently in hospital care in Taiwan [4]. Authors in all three cases argue that GB payment with price adjustment and with FFS providers is a form of common-pool resources, where, instead of cooperating to keep volumes low and thereby prices high, each physician attempts to individually maximize revenues leading to high volumes and low prices. ...
Article
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Global budget (GB) arrangements have become a popular method worldwide to control the rise in healthcare expenditures. By guaranteeing hospital funding, payers hope to eliminate the drive for increased production, and incentivize providers to deliver more efficient care and lower utilization. We evaluated the introduction of GB contracts by certain large insurers in Dutch hospital care in 2012 and compared health care utilization to those insurers who continued with more traditional production-based contracts, i.e., cost ceiling (CC) contracts. We used the share of GB hospital funding per postal code region to study the effect of contract types. Our findings show that having higher share of GB financing was associated with lower growth in treatment intensity, but it was also associated with higher growth in the probability of having at least one hospital visit. While the former finding is in line with our expectation, the latter is not and suggests that hospital visits may take longer to respond to contract incentives. Our study covers the years of 2010–2013 (2 years before and 2 years following the introduction of the new contracts). Therefore, our results capture only short-term effects.
... Dans un système de santé régulé, l'enjeu principal est d'inciter les prestataires de services de la santé à réduire les coûts sans pour autant les amener à ignorer la qualité des soins. Un outil pour freiner la hausse de la dépense de la santé est de contrôler le paiement des prestataires est de fixer la dépense totale pour les prestataires de santé, (Benstetter et Wambach, 2006). Cet outil a été utilisé par plusieurs pays européens, c'est ce que l'on appelle le budget global. ...
... D'autre part, si le budget a été fixé trop bas, cela peut entrainer une baisse d'efficience chez les prestataires et la qualité de soins qu'ils fournissent.Cela peut enchainer un effet de cercle vicieux et à la fin les prestataires seront forcés de quitter le marché. Pour briser ce cercle vicieux,Benstetter et Wambach (2006) proposent d'ajouter un prix unitaire garanti dans le budget global, fixé selon leur modèle, cette solution a le même effet que celui de mettre en place un nombre maximum de traitements dans un système budgétaire. D'autre part, ce système budgétaire demande une révision périodique, si la quantité de soins baisse, le budget accordé doit baisser également, sinon le budget global n'aura pas d'effets sur le contrôle de dépenses. ...
Thesis
La thèse présente le système de santé en Chine à travers son évolution depuis les années 50 et en fait une analyse institutionnelle pour comprendre comment le gouvernement chinois a réagi pendant les différentes phases de développement face à la demande de la population en termes de protection sanitaire. L’idée de cette thèse est de combiner une analyse institutionnelle avec une étude de cas à Weifang en Chine pour comprendre en profondeur le système de santé Chinois, mais aussi pour essayer de fournir des supports utiles pour les autres études qui pourraient être menées sur ce sujet.
... capped at the macro level) and price per unit of activity reimbursed is endogenous (floating rate), and set retrospectively based on the available total budgets and total volume delivered. These types of activity related systems are sometimes referred to as point-systems (Benstetter and Wambach, 2006). * The term Activity Based Financing (ABF) is typically used to describe case based payment systems. ...
... Hence the income of the provider is not only dependent on own activity, but also on the activity of all other providers. This may reinforce provider incentives, inducing a "treadmill effect" (Benstetter and Wambach, 2006). ...
... It adopted a single price regulation method for all of them. But because price regulation shown in Equation 3 had very little chance of being compatible with the global budget, when fee adjustment was applied the year after the excess, France used a floating price mechanism from 2000 to 2002 which was inspired by Germany (Benstetter and Wambach, 2006) and that can be summarized in In France, price regulation was supposed to be more efficient if a way could be found to adjust prices level immediately to global spending. Fees were supposed to be revised twice a year (in April and September) according to the spending level that was reached. ...
... Nevertheless, if volumes of care are steadily increasing, the point value drops and there is a risk of physicians' bankruptcy, because pt could be nearly equal to zero. This problem could be solved if physicians are guaranteed that the fee value could not fall below a pre-determined value (Benstetter and Wambach, 2006). ...
Article
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In France a National Objective for Health Insurance Spending (ONDAM) is annually voted by the Parliament since 1996 and is divided into four sub-groups corresponding to a category of care. We describe how the initial diversity in providers' payment rules conduced to particular regulation procedures for each of them. We then show how the failure of this initial regulating model forced the Health Authorities to converge on a single price regulation procedure since 2000. Preoccupation of the French Health Authorities is now to identify spontaneous determinants of health care expenditures growth rate and to adjust resources to the ONDAM level.
... Hospital expenditure is the largest share of total healthcare spending in many countries (1,2). Payers have used hospital global budgeting to contain escalating expenditures by sharing financial accountability with hospitals and encouraging hospitals to work with other providers to reduce unnecessary care or preventable hospitalizations (3)(4)(5)(6). There are different forms of global budgeting. ...
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Background Taiwan implemented global hospital budgeting with a floating-point value, which created a prisoner's dilemma. As a result, hospitals increased service volume, which caused the floating-point value to drop to less than one New Taiwan Dollar (NTD). The recent increase in the number of hospital beds and the call to enhance the floating-point value to one NTD raise concerns about the potential for increased financial burden without adding value to patient care if hospitals expand their bed capacity for volume-based competition. The present study aimed to examine the relationship between the supply of hospital beds and hospitalizations following an emergency department (ED) visit (called ED hospitalizations) by using diabetes-related ambulatory care sensitive conditions (ACSCs) that are preventable and discretionary as an example. Methods The study was a pooled cross-sectional design analyzing 2011–2015 population-based claims data in Taiwan. The dependent variable was a dummy variable representing an ED hospitalization, with a treat-and-leave ED visit as the reference group. The key independent variable is the number of hospital beds per 1,000 populations. Multivariate logistic regression models with and without a clustering function were used for the analyses. Results Approximately 59.26% of diabetes-related ACSCs ED visits resulted in ED hospitalizations. The relationship between the supply of hospital beds and ED hospitalizations was statistically significant (OR = 1.12; 95% CI: 1.09–1.14; P < 0.001) in the model without clustering but was statistically insignificant in the model with clustering (OR = 1.03; 95% CI: 0.94–1.12; P > 0.05). Several social risk factors were positively associated with the likelihood of ED hospitalizations, such as low income and the percentage of the population without a high school diploma. In contrast, other factors, such as female patients and the Charlson comorbidity index, were negatively associated with the likelihood of ED hospitalizations. Conclusion Under hospital global budgeting with a floating-point value mechanism, increases in hospital beds likely motivate hospitals to admit ED patients with preventable and discretionary conditions. Our study emphasizes the urgent need to add value-based incentive mechanisms to the current global budget payment. The value-based incentive mechanisms may encourage providers to focus on quality of patient care by addressing social risk factors rather than engage in volume-based competition, which would improve population health while reducing preventable ED visits and hospitalizations.
... Payments are typically made on a per-member-per-time basis for the 'population under care' and provide the incentive to shift care from reactive to preventive care, but often fail to include explicit quality measures for the services provided. 14,15 This approach remains a core principle for determining provider reimbursement in the German ambulatory care context and has also been, for example, applied in certain Medicaid programs in the United States. 16 Yet, it has not found wide applicability for the reimbursement of specific therapeutic measures. ...
Article
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Background Germany has one of the oldest social security systems in the world. Population coverage has subsequently increased, reaching coverage of approximately 90% of the population in the statutory health insurance (SHI) system today. Before this background, Germany has been pioneering the integration of digital therapeutics (DTx) into its SHI system by the introduction of the Digital Healthcare Law (Digitale-Versorgung-Gesetz, DVG) in 2019. Thereby, patients became eligible for digital health applications (Digitale Gesundheitsanwendungen, DiGA), which are available upon prescription by qualified healthcare professionals. Challenge As conventional healthcare delivery often lacks direct outcome measures as and is mostly still reimbursed on a fee-for-service basis, DiGA offer the opportunity to continuously provide individual outcome and performance data. They are, therefore, well-suited for a performance-based payment framework. While the DVG introduced the option for performance-based reimbursement components in 2019 already, the ongoing debate about the value of DiGA and to what extent they can contribute to the healthcare system has now been reflected in a 2023 health policy bill by the German Federal Ministry of Health, which aims to introduce a mandatory performance-based reimbursement component for DiGA. Proposal In this light, we propose a framework for performance-based reimbursement of DiGA, involving an intervention-specific, performance-linked reimbursement framework with shared accountability between manufacturers and payers. The approach aims to align the often contradicting interests of the involved stakeholders to incentivize the delivery of high-value digital health care. Yet, the proposal also acknowledges the need for further research to establish a robust foundation for implementing such a framework.
... A study in Taiwan highlighted that patients still preferred receiving treatment at larger hospitals [21]. Evidence regarding outpatient care in Germany and two Canadian provinces suggests that the number of patients increased significantly after global budget payments were implemented [22,23]. These findings contrast with studies from the Netherlands, Maryland, USA, and Hungary, where implementing global budget payments did not significantly change patient numbers [24][25][26]. ...
Article
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Background Since 2020, China has piloted an innovative payment method known as the Diagnosis-Intervention Packet (DIP). This study aimed to assess the impact of the DIP on inpatient volume and bed allocation and their regional distribution. This study investigated whether the DIP affects the efficiency of regional health resource utilization and contributes to disparities in health equity among regions. Methods We collected data from a central province in China from 2019 to 2022. The treatment group included 508 hospitals in the pilot area (Region A, where the DIP was implemented in 2021), whereas the control group consisted of 3,728 hospitals from non-pilot areas within the same province. We employed the difference-in-differences method to analyze inpatient volume and bed resources. Additionally, we conducted a stratified analysis to examine whether the effects of DIP implementation varied across urban and rural areas or hospitals of different levels. Results Compared with the non-pilot regions, Region A experienced a statistically significant reduction in inpatient volume of 14.3% (95% CI 0.061–0.224) and a notable decrease of 9.1% in actual available bed days (95% CI 0.041–0.141) after DIP implementation. The study revealed no evidence of patient consultations shifting from inpatient to outpatient services due to the reduction in hospital admissions in Region A after DIP implementation. Stratified analysis revealed that inpatient volume decreased by 12.4% (95% CI 0.006–0.243) in the urban areas and 14.7% in the rural areas of Region A (95% CI 0.051–0.243). At the hospital level, primary hospitals experienced the greatest impact, with a 19.0% (95% CI 0.093–0.287) decline in inpatient volume. Furthermore, primary and tertiary hospitals experienced significant reductions of 11.0% (95% CI 0.052–0.169) and 8.2% (95% CI 0.002–0.161), respectively, in actual available bed days. Conclusions Despite efforts to curb excessive medical service expansion in the region following DIP implementation, large hospitals continue to attract a large number of patients from primary hospitals. This weakening of primary hospitals and the subsequent influx of patients to urban areas may further limit rural patients’ access to medical services. The implementation of the DIP may raise concerns about its impact on health care equality and accessibility, particularly for underserved rural populations.
... Puller (2006) shows that when a regulator cannot commit to a specific standard (emission standards are constantly renegotiated), firms may adopt strategic behavior by integrating the fact that their performance will be used to establish future standards. Similarly, Benstetter and Wambach (2006) study the treadmill effect in a fixed budget healthcare payment system, wherein the HA commits to the rule of reimbursement instead of a specific price per service. The price of each unit of service is calculated by dividing the fixed budget by the overall number of services (with weights) provided by all physicians. ...
Article
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From an economic perspective, large investments in medical equipment are justifiable only when many patients benefit. Although rural hospitals play a crucial role locally, the treatments they can offer are limited. In this study, I characterize investment level that maximizes the total surplus, encompassing patients' welfare and producer surplus, and subtracting treatment costs. Specifically, I account for economic externalities generated by the investment in the rural hospital and for different utility losses that patients suffer when they cannot be treated locally. I demonstrate that the optimal investment level can be implemented if the Health Authority has the power to set specific prices for each disease. Additionally, I explore a decentralized situation wherein the investment decision lies with the rural hospital manager, and the Health Authority can only make a discrete decision between two payment systems: Fee‐for‐service, which covers all treatment costs, or Diagnosis‐Related‐Groups, which reimburses a price per patient based on the overall average cost. I find that the Diagnosis‐Related‐Groups system outperforms the Fee‐for‐service in terms of total surplus when the treatment cost at the rural hospital is lower. However, when the rural hospital has higher costs and the Health Authority seeks to incentivize investment, the Fee‐for‐service system is superior.
... The second and third mechanisms allocate fixed amounts of funds to health plans and providers, respectively, and the difference between the allocated budget and actual expenditures can be retained as profit or absorbed as a loss. The second and third mechanisms are widely used in the United States and many other developed countries [5][6][7][8]. Due to limited resources and weak regulatory capacity, RGB-FPS has been attempted to improve hospital behavior in recent years in low-and middle-income countries or areas, such as Thailand, Taiwan of China, and the mainland of China [4,9]. Compared to the other two GB mechanisms, there are few studies on RGB-FPS. ...
Article
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Background: Regional Global Budget with a Floating Payment System (RGB-FPS) is a global budget widely used in medical insurance payments. However, existing studies on hospitals' responses to RGB-FPS have limitations. First, existing studies have paid little attention to RGB-FPS's macro effects. Theoretical studies did not analyze differences between different levels of hospitals. Secondly, studies did not reveal whether RGB-FPS has the same impact on the public-hospital-dominated market. Methods: First, we refine the research hypotheses through theoretical analysis. We then test the hypotheses empirically through interrupted time series analysis. Results: Theoretical analysis found that small hospitals were easier to transfer costs. The empirical analysis found that after RGB-FPS, the proportion of inpatients (PI)and the average times of inpatients in large hospitals increased (p < 0.001), and the proportion of non-reimbursable expenses (PNE) remained stable (p > 0.05). PI in secondary hospitals decreased (p < 0.01), and PNE increased (p < 0.01). PI in the primary hospital decreased (p < 0.05), and PNE increased (p < 0.001). Conclusion: This study verifies theoretically and empirically that large hospitals are easier to increase service volume and small hospitals are easier to transfer costs under the influence of RGB-FPS. Chinese public hospitals' response to RGB-FPS is similar to that of private hospitals.
... Theoretical evidence shows that because of coordination problem brought by prisoner's dilemma, the consequence of an expenditure cap with a retrospective payment system is that health care providers compete for the budget by increasing the quantity of services (Feldman and Lobo, 1997;Fan et al., 1998;Benstetter and Wambach, 2006). In 2002, Taiwan has shifted from fee-for-services to a global budget system, which employs the expenditure cap to set a fixed ex ante budget annually with retrospective payment system. ...
Article
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This study divides health care expenditures into observable effects and structural shifts to explore the impacts of population ageing and high technology on the growth in outpatient service, inpatient service, and prescription drug expenditures in a health care system that has experienced a shift in payment schemes from a cost-based to a global budget system. By using the quantile decomposition method to examine data from Taiwan, the study shows that, in the short run, all expenditures exhibit an increasing trend in the higher percentiles. In the long run, an observable effect dominates the growth of health care expenditures. Specifically, population ageing leads to the growth of prescription drug expenditures in the higher percentiles. The adoption of high technology drives the growth of the top outpatient and inpatient service expenditures. These results suggest that while the government health care agency aims to control health care expenditures, improving the management of high-cost patients is likely to be one important avenue to improving the effectiveness of the cost control policy. JEL classification: I10, H51 KEY WORDS: counterfactual decomposition, health care expenditure, observable effect, structural shift 2
... Our findings also remind policymakers in both China and other health systems that the global budget scheme with price adjustment would yield unintended consequences, though it could well address the risk of deficit for medical insurance fund. Taiwan and Germany experienced similar increases in treatment intensity after the introduction of global budget schemes with price adjustment (Benstetter and Wambach, 2006;Chen and Fan, 2015;Cheng et al., 2009). Hospitals in both places had strong incentives to increase per-case treatment intensity to protect their reimbursement from possible discounts. ...
Article
Both developed and developing countries have been searching for effective provider payment methods to control health expenditure inflation. In January 2018, Guangzhou city in Southern China initiated an innovative case-based payment method for inpatient care under the framework of the regional global budget, called the Diagnosis-Intervention Packet (DIP). Contrary to the usual practice of the case-based payment, the DIP payment scheme includes a price adjustment mechanism through which the actual reimbursement for each case is determined ex post. By employing the difference-in-difference method and data from Beijing and Guangzhou, we evaluate the effects of the DIP payment on medical expenditures and provider behaviors. We find that total health expenditures per case have decreased by 3.5%, which is mainly driven by a substantial decrease in drug expenditures. It suggests that the DIP payment reform achieved a short-term success in slowing down the growth of health expenditures. However, the average point volume per case for local inpatients with social health insurance coverage has increased by more than 3%, primarily due to an increasing likelihood of performing at least one procedure. We also find suggestive evidence of up-coding. All these results suggest that healthcare providers have taken strategic behaviors in response to the DIP payment. These findings hold lessons for the ongoing payment reforms in China and other countries.
... W literaturze poświęconej systemom budżetu globalnego z korektą ceny ex post i alokacją budżetu na poziomie regionalnym lub sektorowym stwierdzono wzrost wykorzystania świadczeń zdrowotnych w wyniku przyjęcia budżetu globalnego. Takie wyniki otrzymano dla dwóch prowincji w Kanadzie (Hurley, Lomas, Goldshmith, 1997), w niemieckiej opiece ambulatoryjnej (Benstetter, Wambach, 2006), a ostatnio w opiece szpitalnej na Tajwanie. Autorzy we wszystkich trzech analizach twierdzą, że płatność z budżetu globalnego z korektą ceny i jednoczesnymi dostawcami usług fee for service jest formą, w której lekarz stara się indywidualnie maksymalizować przychody prowadzące do dużej liczby świadczeń, przy stosunkowo niskich cenach (Gaspar, Portrait, van der Hijden, Koolman, 2019). ...
Article
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The aim of the article is to present the main characteristics of selected health services financing schemes from the supply side and to analyse their impact on the behaviour of healthcare providers (in terms of the effectiveness of services provided and their volume). Analyses indicate that each of the existing financing mechanisms affects providers’ decisions. The impact can be observed both in the short and long term, on healthcare entities and patients (micro effects) as well as on the whole healthcare system (macro effects).
... Theoretical evidence shows that because of coordination problem brought by prisoner's dilemma, the consequence of an expenditure cap with a retrospective payment system is that health care providers compete for the budget by increasing the quantity of services (Feldman and Lobo, 1997;Fan et al., 1998;Benstetter and Wambach, 2006). In 2002, Taiwan has shifted from fee-for-services to a global budget system, which employs the expenditure cap to set a fixed ex ante budget annually with retrospective payment system. ...
... Related literature studying global budgeting focuses on either the effect on quantity or quality of healthcare services. Theoretical studies agree that medical providers have an incentive to increase their quantity of services after global budgeting due to the prisoner's dilemma or the tragedy of commons (Feldman and Lobo 1997;Fan et al. 1998;Benstetter and Wambach 2006). However, Chen et al. (2007), Cheng et al. (2009), and Chen and Fan (2015) analyzed Taiwanese data and found that the effect of global budgeting on service quantity varies with patients' disease and the size of hospitals. ...
Article
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Global budgeting sets a predetermined cap to restrain health expenditure, but the fixed budget for medical providers could result in less efficient services. This paper measures hospital efficiency under global budgeting using simultaneous stochastic frontier analysis, stressing that physicians and dentists within a hospital were under separate budgets in Taiwan. Empirical results show that hospital efficiency was not improved after global budgeting, and physicians were found to be less efficient than dentists. The physicians and dentists within the same hospital were also found to be less integrated after global budgeting. Empirical results show that a joint analysis improves the estimation efficiency from separate analysis and suggest that the aggregate inefficiency came mostly from physicians in hospitals that were small, public, non-teaching, located in small markets and had a low market share. Except for public hospitals, physicians and dentists in the above hospitals were also found to be less integrated.
... Specifically, as the provider reimbursement is determined retrospectively contingent on the relative volume shares, providers are incentivized to engage in volume expansion, which ironically reduces prices for all. 20 Furthermore, it has been observed repeatedly that in addition to volume growth, there are also changes in service mix and practice with grave implications for allocative efficiency and health care quality. 6,21 We mapped a number of well-known and empirically documented examples of global budget payment systems using our framework (see Table 1). ...
Article
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To control ever-increasing costs, global budget payment has gained attention but has unclear impacts on health care systems. We propose the CAP framework that helps navigate 3 domains of difficult design choices in global budget payment: Constraints in resources (capitation vs facility-based budgeting; hard vs soft budget constraints), Agent-principal in resource allocation (individual vs group providers in resource allocation; single vs multiple pipes), and Price adjustment. We illustrate the framework with empirical examples and draw implications for policy makers.
... A close mechanism was also implemented in 1993 in Germany (Benstetter, 2006 A soft regulation process based on "mutual confidence" could also emerge locally. The local public Health Insurance authorities sit down with producers to adopt a regulatory approach that is acceptable to them. ...
Article
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In 1998 the Fifty-first World Health Assembly passed the "health-for-all policy for the twenty-first century". During this assembly the Member States of the World Health Organization (WHO) reaffirmed their commitment to the principle that "the enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being". Even if there is now a worldwide consensus that health insurance plans should cover the whole population to attain the highest standard of health, a question still remains unsolved. What kind of health insurance coverage is the most likely to attain this goal efficiently? European countries are frequently cited as exemplary for the high level of health attained by their population, while sometimes very different health insurance models are implemented today in these countries. This paper discusses the advantages and shortfalls of the different options, for health insurance and population coverage that have been chosen in Europe. Four topics are treated successively: the choice between private and public insurance, how to guarantee the balance between revenue and expenditure? What should be the basis for health insurance payment? And finally should health care services be totally free of charge for the patients?
... Similar quadratic utilities, albeit with a different interpretation of variables, have been used for physicians in recent healthcare literature (Benstetter and Wambach, 2006). ...
Article
The appropriate role of medical professionals in a hospital's top management team is a controversial issue. Clearly, the medical director plays an important part in balancing medical and financial performance. It is perceived wisdom among medics that the medical director's position should be strong and on an equal footing with the commercial director. Clinicians believe that relegating their representative to a subordinate role would entail financial considerations taking precedence in decision making, leading to cost-cutting and consequent detrimental effects on medical performance. We challenge this view, presenting arguments in favour of detailing the medical director a subordinate role. Using a simple game theory framework, we demonstrate that placing the medical director in a subordinate position may in fact lead to increased resources and superior medical performance, because medical and financial performance are strategic complementarities. We present empirical evidence to support the predictions of our model.
... Referring to the case of Germany, which has implemented a global budget system since 1990, a decline in the treatment dollar value implies that the workload of attending physicians is getting much heavier. 2 In major hospitals, attending physicians are usually responsible for clinical work as well as teaching, research, and administrative tasks. Studies have shown that physicians are becoming dissatisfied with their jobs due to increasing administrative duties, 3 and some physicians have suggested that assistants should deal with administrative tasks so that physicians can spend more time caring for patients. ...
Article
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Since the fee-for-service reimbursement mechanism has been under the global budget of the National Health Insurance program, physicians' workloads have been increasing. Attending physicians in medical centers usually have long working hours because of their clinical work as well as teaching, research, and other administrative responsibilities. Many studies regarding reasonable work hours for physicians have been undertaken globally, but few have been conducted in Taiwan. In this study, we focused on the difference in working hours among physicians in different departments. Using attending physicians from a major teaching hospital as the study population, we adopted self-administered questionnaires to investigate physicians' time allocations for 4 major categories: clinical work, teaching, research, and administrative work. We distributed 432 questionnaires and received 380 filled-out questionnaires, yielding a response rate of 88%. After eliminating questionnaires with incomplete responses, the valid sample size was 376. We used t test and 1-way ANOVA to analyze the association between physicians' characteristics and workload and used multiple linear regression to examine factors influencing physicians' work hours. The average weekly work time among attending physicians was 65.6 hours; physicians under the age of 40 worked an average of 69.8 hours. Males worked an average of 66.2 hours weekly and females an average of 62.7 hours. Total work hours and hours of clinical work, teaching, research, and administrative work all reached significant differences among departments. Physicians who were under 40 years old, those with a doctoral degree, those with a teaching position as associate professor or above, and those working in anesthesiology had longer total work hours. This study found that work hours among departments differed significantly and that physicians in surgical departments spend the longest hours in clinical work. Those in administrative positions are most involved in clinical work. However, work hours do not definitely represent work intensity, and to define the workload by working hours may be inappropriate for some departments. This possible difference between work hours and work intensity merits further consideration.
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This paper investigates medical providers’ supply curve under universal healthcare system with global budgeting, which theory predicts to be either positive or negative sloping. Using the population data of medical providers’ services and exogenous shifted budgets in Taiwan, empirical evidence shows that the dentists and Chinese herb practitioners maintained positive sloping supply curves. Hospitals and clinics that practice Western medicine were found to have negative sloping supply curves. The latter results indicate medical providers have incentives to provide excessive services under global budgeting, even when this drives down the price of their services provided.
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This study divides health care expenditures into observable effects and structural shifts to explore the impacts of population ageing and high technology on the growth in outpatient service, inpatient service, and prescription drug expenditures in a health care system that has experienced a shift in payment schemes from a cost-based to a global budget system. By using the quantile decomposition method to examine data from Taiwan, the study shows that, in the short run, all expenditures exhibit an increasing trend in the higher percentiles. In the long run, an observable effect dominates the growth of health care expenditures. Specifically, population ageing leads to the growth of prescription drug expenditures in the higher percentiles. The adoption of high technology drives the growth of the top outpatient and inpatient service expenditures. These results suggest that while the government health care agency aims to control health care expenditures, improving the management of high-cost patients is likely to be one important avenue to improving the effectiveness of the cost control policy.
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Containing rising health care costs by a global budget offers promise, but might have unintended effects on the composition of medical specialty workforces. When a budget is given to a group of medical providers and the physician/population ratio is growing, the ex-post total sum of fee units would exceed the ex-ante budget, thereby reducing the reimbursement for all services for all providers. Furthermore, the profit of high revenue services drops more than the profit of low revenue services. Thus, medical school graduates are less likely to choose a specialty with high revenue in response to the global budget scheme and physicians may leave labor force earlier because of lowered profit. The author provides empirical evidence by a synthetic control method that the number of surgeons in Taiwan has exhibited a decrease of 25% after 11 years of Taiwan's global budget scheme. During that same period of time, the total number of practicing physicians decreased only 13%.
Article
This paper investigates whether health care providers change their behaviour in response to different payment structures. Using a policy reform in Taiwan that allowed hospitals to switch from a global budgeting system, a reweighted fee-for-service system, to an individual budgeting system, a capitation system, the results show that the individual budgeting system led to lower services volumes. This effect is significant for more discretionary care but not for less elective services like cancer care.
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Background Global budget payments (GBP) are considered effective in containing health care expenditures; however, information on their impact on quality of cardiovascular care is limited. We aimed to evaluate the effects of GBP on utilization, outcomes, and costs for 3 major cardiovascular conditions. Methods We analyzed claims data of hospital admissions in Maryland from fiscal year 2013 to 2018. Using segmented regression, we evaluated temporal trends in hospitalizations, length of stay, percutaneous coronary intervention and coronary artery bypass grafting volumes, case mix-adjusted 30-day readmission rates, risk-standardized mortality rates, and hospitalization charges in patients with principal diagnosis of heart failure, acute ischemic stroke, and acute myocardial infarction (AMI) in relation to GBP implementation. Trends in global cardiovascular procedure charges/volumes were also studied. Results Hospitalization rates for congestive heart failure and AMI remained unaffected by GBP, while the gradient of ischemic stroke admissions decreased ( P trend <0.0001). Length of stay slightly increased for patients with congestive heart failure ( P trend =0.03). Inpatient coronary artery bypass grafting surgeries decreased ( P trend <0.0001). We observed a significant decrease in casemix-adjusted 30-day readmission rate in the AMI cohort beyond the prepolicy trend ( P trend =0.0069). There were no significant changes in mortality for any of the 3 conditions. Hospitalization charges increased for ischemic stroke ( P trend <0.0001), remained constant for congestive heart failure ( P trend =0.1), and decreased for AMI ( P trend =0.0005). We observed a significant increase in electrocardiography rate charges ( P trend <0.0001), coincidentally with a reduction in volumes ( P trend =0.0003). Conclusions Introducing GBP in Maryland had no perceivable adverse effects on inpatient outcomes and quality indicators for 3 major cardiovascular conditions. Savings were observed in the AMI cohort, possibly due to reduced unnecessary readmissions, efficiency improvements, or shifts to outpatient care. Reduced cardiovascular procedure volumes were counterbalanced by a proportional rise in charges. State-level adoption of GBP with pay-for-performance incentives may be effective for cost containment without adversely impacting quality of cardiovascular care.
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Based on an intertermporal entry model of the physician market, we analyze how the supply of office-based physicians depends on regional character and on the age-structure of the local population as determinants of the current profitability of physician services, on local population change as a predictor of future demand, and on the extent of equilibrium adjustment within local markets. Using German regional data, we find that the number of general practitioners (GPs) per capita is positively related to the share of the population 60 and above within metropolitan areas, but negatively within rural areas. Future changes in list size have an impact on the current supply of GPs, suggesting limitations to equilibrium adjustment especially in regions with excess supply. Overall, population change should have raised the profitability of GP services over the period 1997–2008. The falling supply of GPs, especially in rural regions, then implies an increase in reservation income.
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The study attempts to investigate the features and determinants of the performance of Taiwanese Traditional Chinese Medicine (TCM) Clinics with data for 4905 TCM clinics over the 1998 to 2012 period. The empirical results from the fixed effects model and the Hausman-Taylor Model with cluster-robust standard errors reveal several interesting findings. First, consumer characteristics such as the frequency of disabling injuries has positive impacts on the volume of medical services provided by TCM clinics. These results imply that people are likely to select TCM as the option for medical treatment when they face the occurrence of physical injury in Taiwan. In addition, the scale measurements for TCM clinics including the numbers of physicians, medical personnel and divisions have significantly positive effects on the performance of TCM clinics, while their survival length also has the same effect. Finally, the global budget system under the NHI plays a key role in suppressing the revenue of TCM clinics through the peer review mechanism.
Article
Objective: To examine the impact of provider competition under global budgeting on the use of cesarean delivery in Taiwan. Data sources/study setting: (1) Quarterly inpatient claims data of all clinics and hospitals with birth-related expenses from 2000 to 2008; (2) file of health facilities' basic characteristics; and (3) regional quarterly point values (price conversion index) for clinics and hospitals, respectively, from the fourth quarter in 1999 to the third quarter in 2008, from the Statistics of the National Health Insurance Administration. Study design: Panel data of quarterly facility-level cesarean delivery rates with provider characteristics, birth volumes, and regional point values are analyzed with the fractional response model to examine the effect of external price changes on provider behavior in birth delivery services. Principal findings: The decline in de facto prices of health services as a result of noncooperative competition under global budgeting is associated with an increase in cesarean delivery rates, with a high degree of response heterogeneity across different types of provider facilities. Conclusions: While global budgeting is an effective cost containment tool, intensified financial pressures may lead to unintended consequences of compromised quality due to a shift in provider practice in pursuit of financial rewards.
Article
Background: Soaring health expenditures worldwide call for potent cost-containment approaches. Global budgets have been used by several countries to harness their health expenditures by constraining the total payable amount to a predefined budget threshold. Objectives: Cyprus is vacillating on the use of a global budget for its National Health System; nevertheless, its attributes must be scrutinized to rule out potential adverse effects on quality of care and access of patients. The delegation of budget across providers is a context-sensitive process and as such it must be based on historical data and performance incentives as well. Conclusions: A global budget is not a panacea, and consequently the enhancement of health system's performance, appropriateness assessment, and volume and capacity control measures are incumbent. A global budget demonstrates a higher complexity factor for pharmaceuticals, which mandates a thorough assessment of pharmaceuticals before their reimbursement and elaboration of measures to safeguard timely access to innovation.
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Objectives: To evaluate the differences in healthcare utilization before and after implementation of the Departmental Clinics Global Budget Program (DCGBP), and to investigate physicians' behavior in response to the DCGBP. Methods: Data were obtained from the 2005 Longitudinal Health Insurance Database. In order to determine the impact of DCGBP on healthcare utilization, the samples were separated into two groups, a high utilization group and a low utilization group. We used the difference-in- differences method to analyze the difference in healthcare utilization before and after implementation of the DCGBP. Results: Our empirical results showed that the DCGBP decreased drug days per visit in the high utilization group, but it impacted healthcare utilization (such as claimed expenditure, drug expenditure, co-payment, and drug days) positively in the low utilization group. Conclusions: The Bureau of National Health Insurance should monitor specific indices such as the numbers of outpatient visits per month, drug days, drug expenditure, and co-payment per visit to determine if physicians' behaviors change in response to change in the payment system.
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Global budget payment is one of the most effective strategies for cost containment, but its impacts on provider behavior have not been explored in detail. This study examines the theoretical and empirical role of global budget payment on provider behavior. The study proposes that global budget payment with price adjustment is a form of common-pool resources. A two-product game theoretic model is derived, and simulations demonstrate that hospitals are expected to expand service volumes, with an emphasis on products with higher price–marginal cost ratios. Next, the study examines the early effects of Taiwan's global budget payment system using a difference-in-difference strategy and finds that Taiwanese hospitals exhibited such behavior, where the pursuit of individual interests led to an increase in treatment intensities. Furthermore, hospitals significantly increased inpatient service volume for regional hospitals and medical centers. In contrast, local hospitals, particularly for those without teaching status designation, faced a negative impact on service volume, as larger hospitals were better positioned to induce demand and pulled volume away from their smaller counterparts through more profitable services and products such as radiology and pharmaceuticals. Copyright © 2014 John Wiley & Sons, Ltd.
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This paper investigates the effects of global budgets on the amount of resources devoted to cardio-cerebrovascular disease patients by hospitals of different ownership types and these patients' outcomes. Theoretical models predict that hospitals have financial incentives to increase the quantity of treatments applied to patients. This is especially true for for-profit hospitals. If that's the case, it is important to examine whether the increase in treatment quantity is translated into better treatment outcomes. Our analyses take advantage of the National Health Insurance of Taiwan's implementation of global budgets for hospitals in 2002. Our data come from the National Health Insurance's claim records, covering the universe of hospitalized patients suffering acute myocardial infarction, ischemic heart disease, hemorrhagic stroke, and ischemic stroke. Regression analyses are carried out separately for government, private not-for-profit and for-profit hospitals. We find that for-profit hospitals and private not-for-profit hospitals did increase their treatment intensity for cardio-cerebrovascular disease patients after the 2002 implementation of global budgets. However, this was not accompanied by an improvement in these patients' mortality rates. This reveals a waste of medical resources and implies that aggregate expenditure caps should be supplemented by other designs to prevent resources misallocation.
Article
Background: Under the circumstance of the New Medical Reform in Mainland of China, lowering drug prices has become an approach to relieving increase of medical expenses, and lowering brand-name medication price is a key strategy. This study, by comparing and analyzing brand-name medication prices between Mainland of China and Taiwan, explores how to adjust brand-name medication prices in Mainland of China in the consideration of the drug administrative strategies in Taiwan. Methods: By selecting brand-name drug with generic name and dose types matched in Mainland and Taiwan, calculate the average unit price and standard deviation and test it with the paired t-test. In the mean time, drug administrative strategies between Mainland and Taiwan are also compared systematically. Results: Among the 70 brand-name medications with generic names and matched dose types, 54 are at higher prices in Mainland of China than Taiwan, which is statistically significant in t-test. Also, among the 47 medications with all of matched generic names, dose types, and manufacturing enterprises, 38 are at higher prices in Mainland than Taiwan, and the gap is also statistically significant in t-test. In Mainland of China, brand-name medication took cost-plus pricing and price-based price adjustment, while in Taiwan, brand-name medication took internal and external reference pricing and market-based price adjustment. Conclusions: Brand-name drug prices were higher in Mainland of China than in Taiwan. The adjustment strategies of drug prices are scientific in Taiwan and are worth reference by Mainland of China.
Article
Taiwan's global budgeting for hospital health care, in comparison to other countries, assigns a regional budget cap for hospitals' medical benefits claimed on the basis of fee-for-service (FFS) payments. This study uses a stays-hospitals-years database comprising acute myocardial infarction inpatients to examine whether the reimbursement policy mitigates the medical benefits claimed to a third-payer party during 2000-2008. The estimated results of a nested random-effects model showed that hospitals attempted to increase their medical benefit claims under the influence of initial implementation of global budgeting. The magnitudes of hospitals' responses to global budgeting were significantly attributed to hospital ownership, accreditation status, and market competitiveness of a region. The results imply that the regional budget cap superimposed on FFS payments provides only blunt incentive to the hospitals to cooperate to contain medical resource utilization, unless a monitoring mechanism attached with the payment system.
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This study analyses the effect of a change in the remuneration system for physicians on the treatment lengths as measured by the number of doctor visits using data from the German Socio-Economic Panel over the period 1995-2002. Specifically, I analyse the introduction of a remuneration cap (so called practice budgets) for physicians who treat publicly insured patients in 1997. I find evidence that the reform of 1997 did not change the extensive margin of doctor visits but strongly affected the intensive margin. The conditional number of doctor visits among publicly insured decreased while it increased among privately insured. This can be seen as evidence that physicians respond to the change in incentives induced by the reform by altering their patient mix.
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Controlling the cost of chronic diseases remains one of the vexing problems of developed and developing nations alike. Taiwan, faced with rapidly escalating healthcare costs associated with End Stage Renal Disease (ESRD) services utilization, imposed an outpatient dialysis global budget (ODBG) on outpatient dialysis care. This study, using a before and after study design with a comparison group, assessed the impact of this policy innovation on outpatient, inpatient and emergency room utilization. Using a difference in difference (DID) strategy and the generalized estimating equation (GEE) approach, this study found providers responded to these changes through cost reduction and revenue enhancement strategies. This study extends our understanding of provider responses to changes in reimbursement policies that target one segment of the continuum of care required by chronic disease patients.
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Die Dissertation beschäftigt sich hauptsächlich mit der empirischen Untersuchung von Anreizeffekten der Krankenversicherung in Deutschland, sowohl für Nachfrager nach Gesundheitsleistungen (Patienten und Versicherte) als auch für Anbieter (Ärzte). Auf der Nachfrageseite wird analysiert, inwieweit der Krankenversicherungsvertrag die Nachfrage nach Arztbesuchen beeinflusst, nachdem für individuelle Charakteristika wie Bildung, Einkommen, vor allem aber den Gesundheitszustand kontrolliert wurde. Bei Privatversicherten wird unterschieden zwischen Inhabern von Krankenversicherungsverträgen mit und ohne Selbstbehalt. Bei gesetzlich Versicherten wird unterschieden zwischen Patienten mit und ohne private Zusatzversicherung für ambulante Leistungen. Die Datenbasis ist – wie in allen folgenden Abschnitten – das Sozioökonomische Panel (SOEP). Auf der Angebotsseite wird analysiert, inwieweit die unterschiedliche Vergütung, die niedergelassene Ärzte für unterschiedlich Versicherte bei gleicher Behandlung erhalten, einen Einfluss auf die Dauer der Behandlungen hat. Hier wird untersucht, inwieweit die Reform des Vergütungssystems im Juli 1997 für die Behandlung gesetzlich Versicherter einen Einfluss auf die Zahl der Arztbesuche hat. Das dritte Kapitel befasst sich mit der Untersuchung, wer private Zusatzversicherung für Krankenhausleistungen (Einzel- oder Doppelzimmer und Chefarztbehandlung) kauft und ob Personen mit Zusatzversicherung mehr Krankenhausleistungen in Anspruch nehmen. Dabei wird untersucht, ob es Informationsasymmetrien zwischen Versicherungsnehmern und den Versicherungsunternehmen gibt und wie diese aussehen. Der besondere Fokus liegt dabei auf dem Einfluss der Risikoaversion (als private Information des Versicherungsnehmers) auf die Nachfrage nach Versicherung. In einem abschließenden Kapitel untersucht die Arbeit den kausalen Effekt von Arbeitslosigkeit auf den Gesundheitszustand. Neben der Kontrolle für unbeobachtbare individuenspezifische Effekte, die gleichzeitig die Wahrscheinlichkeit erhöhen, arbeitslos zu werden und einen schlechteren Gesundheitszustand zu haben, schließt diese Arbeit auch explizit umgekehrte Kausalität (von schlechter Gesundheit zu Arbeitslosigkeit) aus. Ersteres geschieht durch Nutzung eines Fixed-Effects-Modells, Letzteres durch Betrachtung von Personen, die durch Schließung ihrer Betriebsstelle arbeitslos geworden sind und nicht etwa aus anderen Gründen entlassen wurden oder selbst gekündigt haben.
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This article simulates the pricing-out effect due to various user-fee policies under Taiwan's National Health Insurance. Our simulation results indicate that the lower income group is more likely to be priced out of the healthcare system than the higher income group. On average, pricing-out effects are 0.04, 0.21, 0.52 and 0.73% of total beneficiaries with respect to the new co-payment policy, the catastrophic insurance policy, the under insurance policy, and the case of no National Health Insurance, respectively. We caution that a reduction of healthcare utilization due to higher user fees could result in some patients being left behind without professional care because the pricing-out effects could be higher than the substitution effects diverting demand to other professional care alternatives.
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This article is about a market for credence goods. With a credence good, consumers are never sure about the extent of the good they actually need. Therefore, sellers act as experts determining the customers' requirements. This information asymmetry between buyers and sellers obviously creates strong incentives for sellers to cheat on services. I analyze whether the market mechanism may induce nonfraudulent seller behavior. From the observation of market data such as prices, market shares, etc., consumers can infer the sellers' incentives. I show that market equilibria resulting in nonfraudulent behavior do indeed exist.
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The paper shows that an increase in competition has two effects on managerial incentives: It increases the probability of liquidation, which has a positive effect on managerial effort, but it also reduces the firm's profits, which may make it less attractive to induce high effort. Thus, the total effect is ambiguous. I identify natural circumstances where increasing competition unambiguously reduces managerial slack. In general, however, this relation need not be monotonic. A simple example demonstrates that—starting from a monopoly—managerial effort may increase as additional competitors enter the market, but will eventually decrease when competition becomes too intense.
Chapter
The professional relationship arises from the significant information differential between physician and patient, and permits the physician to exert direct, non-price influence on the demand for his own services. If the economic status of the physician affects the level and direction of such influence exerted, then models of the demand for care which do not include explicit consideration of supplier behavior are incompletely specified. This paper outlines the effect on demand analyses of two alternative specifications of physician behavior, and notes that each can lead to ‘perverse’ response of price to increases in supply, or of quantity demanded to price. It then examines several pieces of empirical evidence from Canada and the United States which are consistent with substantial demand influence by physicians, with responses of generated output to physician stock around 80 per cent through increases in supply of physician-initiated services. The conclusion is that policy to limit price inflation, correct ‘shortages’ or restrain unnecessary utilization cannot be based on conventional supply and demand models.
Article
This paper analyzes two alternative methods for controlling the cost of physician services under global budgeting: the expenditure target involves quantity control while the expenditure cap is a retrospective price-setting mechanism. Theoretical analysis shows that given the same spending, a larger quantity of physician services will be provided under the symmetric Nash equilibrium outcome of expenditure cap. We conducted laboratory-controlled experiment and found that the behavior of medical students was well-approximated by the symmetric Nash equilibrium. Therefore, the experimental results support the theoretical analysis and confirm that expenditure cap is a better system.
Article
This article investigates how information asymmetries affect the organization of markets in which sellers are also experts who determine customers' needs. It examines how customers' search for multiple opinions and reputation considerations each play a role in disciplining experts. It shows that customer search may give rise to an equilibrium in which experts specialize in different levels of the service. It discusses the effect of the search-cum-diagnosis costs on the market's organization: experts are more likely to be disciplined by customer search or by reputation according to whether these costs are lower or higher. It also shows that when experts are liable to make diagnosis errors, there is a negative search externality that tends to raise prices.
Book
The authors, two of the most prominent game theorists of this generation, have devoted a number of years to the development of the theory presented here, and to its economic applications. They propose rational criteria for selecting one particular uniformly perfect equilibrium point as the solution of any noncooperative game. And, because any cooperative game can be remodelled as a noncooperative bargaining game, their theory defines a one-point solution for any cooperative game as well. By providing solutions - based on the same principles of rational behavior - for all classes of games, both cooperative and noncooperative, both those with complete and with incomplete information, Harsanyi and Selten's approach achieves a remarkable degree of theoretical unification for game theory as a whole and provides a deeper insight into the nature of game-theoretic rationality. The book applies this theory to a number of specific game classes, such as unanimity games; bargaining with transaction costs; trade involving one seller and several buyers; two-person bargaining with incomplete information on one side, and on both sides. The last chapter discusses the relationship of the authors' theory to other recently proposed solution concepts, particularly the Kohberg-Mertens stability theory.
Article
Since 1990 payment for physician services in the fee-for-service sector has shifted from an open-ended system to fixed global budgets. This shift has created a new economic context for practising medicine in Canada. A global cap creates a conflict between physicians' individual economic self-interest and their collective interest in constraining total billings within the capped budget. These types of incentive problems occur in managing what are known in economics as "common-property resources." Analysts studying common-property resources have documented several management principles associated with successful, long-run use of such resources in the face of these conflicting incentives. These management principles include early defining the boundaries of the common-property resource, explicitly specifying rules for using the resource, developing collective decision-making arrangements and monitoring mechanisms, and creating low-cost conflict-resolution mechanisms. The authors argue that global physician budgets can usefully be viewed as common-property-resources. They describe some of the key management principles and note some implications for physicians and the provincial and territorial medical associations as they adapt to global budgets.
Article
This paper develops a general model of physician behavior with demand inducement encompassing the two benchmark cases of profit maximization and target-income behavior. It is shown that when income effects are absent, physicians maximize profits, and when income effects are very strong, physicians seek a target income. The model is used to derive own and cross-price expressions for the response of physicians to fee changes in the realistic context of more than one payer under the alternative behavior assumptions of profit maximization and target income behavior. The implications for public and private fee policy, and empirical research on physician response to fees, are discussed.
Article
A controversial technique for testing the hypothesis that physicians induce demand involves two stage least squares (TSLS) regression analysis of cross-section data on physician supply and utilization. This paper tests the power of TSLS by applying it where there is at most only a trivial amount of demand inducement--the demand for childbirths. We find 'evidence' of inducement of childbirths, calling into question the validity of the TSLS approach. This unlikely finding may be traced to at least two factors: The first stage regression is not identified and the second stage regression does not adequately address border crossing.
Article
Despite twenty years of work on supplier-induced demand (SID) there has been little discussion or investigation of how inducement affects the health of patients. We develop a conceptual framework for SID which includes the clinical effectiveness of the health services utilized as well as the effectiveness of the agency relationship between the physician and the patient. The framework is used to identify several conceptually distinct types of utilization--each with its own policy implications--which have been intermingled in the SID literature. After examining each type of utilization, we conclude that a continued focus by health economists on the phenomenon of inducement (even within an extended conceptual framework) may be too limited for the development of policies regarding health service utilization.
Article
General practice reform is occurring in a number of countries. Little is known, however, of the effects of remunerating general practitioners on the costs and outcomes of care. Valuable lessons can be learned for the scope and design of future research, however, from the existing literature on the effects of general practioner (GP) remuneration. The objectives of this paper are to highlight some of the problems and pitfalls that should be avoided in any further research on the effects of GP remuneration and to identify the main issues for future research. Eighteen studies of the effects of GP remuneration have been reviewed, with a focus on the methods used. Eight studies addressed the effect of changes in the level of remuneration, three evaluated the effect of special payments and bonuses and seven assessed the effects of different remuneration systems. Although there are often practical constraints on the choice of study design, crude 'before and after' analyses and the use of aggregate data should be avoided in favour of prospective evaluations using consultation-based data. The studies reviewed did not evaluate the effects of remuneration on patient welfare and were characterised by the omission of major confounding variables and an inability to generalise to other settings. These issues present a considerable challenge to researchers, GPs and policy makers.
Article
Many well-known papers in the literature of health economics assume that prices paid to providers (gross prices) approximate those that would be set in a competitive market (e.g., Pauly 1968; Feldstein 1973) or that any deviation from competitive prices is well understood (Crew 1969). In the policy arena, however, this view has not predominated; for example, in the United States Medicare payments to physicians have recently been changed on the premise that prices do not resemble those set in a competitive market (Hsiao et al., 1988; PPRC, 1987).
Article
The physician/patient relationship is a paradigm for any expert/client relationship. The physician both diagnoses the patient's illness and recommends a treatment. This dual role gives the physician incentive to recommend treatments whose costs outweigh their medical benefits. These socially inefficient treatments correspond to the notion of "physician-induced demand." The level of inducement chosen by the physician is shown to depend on the price and potential medical benefits of treatment and the relative diagnostic skills of physician and patient. This model offers several testable hypotheses, some of which are confirmed by related studies.
Article
In several European countries, governments have chosen to put a global budget cap on health care expenditure. This paper analyzes the strategies of the providers facing this policy and evaluates its effects on provider and patient surplus. We consider this policy when it is applied to local monopoly hospitals and when it is applied to hospitals playing as Cournot competitors. Using a two-stage model to characterize the optimal expenditure cap policy taking the hospitals' optimal responses as given, we prove that this policy induces a level of welfare lower than the first-best outcome. However, we show that a second-best outcome may be achieved under this policy when the number of hospitals becomes large.
Article
This study investigates the extent to which current geographical variations in mortality are influenced by patterns of migration since birth. It is based on a longitudinal study of migrants which consists of a representative sample of 10264 British residents born after 1890 and enumerated as part of the British Household Panel Study in 1991. Between 1991 and 1996, 527 of the study members died and these deaths were analysed by area of residence at birth and in 1991 at both the regional and local district geographical scales. These were compared with findings from the Office for National Statistics Longitudinal Study. The British Household Panel Survey sample replicates the results of work conducted on the Longitudinal Study which finds that geographical variations in age-sex standardised mortality ratios at the regional scale cannot be attributed to selective migration. However, for the British Household Panel Survey sample, the major geographical variations at district level could be attributed to selective migration. Geographical variations in mortality are not well understood. Restrictions on what it is possible to analyse in the Office for National Statistics Longitudinal Study may have resulted in the underestimation of the importance of local lifetime selective migration in producing the contemporary map of mortality variation across Britain. The British Household Panel Survey is a small, recent, but very flexible study, which can be used to investigate the effects of lifetime migration on mortality patterns for all of Britain. This first report of its results on mortality shows that it produces findings which accord with the much larger Longitudinal Study, but which can be taken further to show that selective migration over the whole life-course at the local level does appear to have significantly altered the geographical pattern of mortality seen in Britain today.
Article
The authors derive optimal insurance for patients and payment method for physicians when neither the input decided by the patient (quantity of treatment) nor the input decided by the physician (effort) are contractible. The equilibrium in this third-best regime may sometimes be second best, in which both the physician input and the report of treatment are verifiable. Otherwise, truthful reporting forces a third best, characterized by provider 'prospective payment' and suboptimal effort, while consumers' demand becomes excessive. The authors also analyze how 'professional ethics' alters the equilibrium. Finally, collusive reporting mechanisms imply more stringent constraints, while competition among physicians relaxes them. Copyright 1997 by American Economic Association.
Article
What is the nature of the industrial organization of the market for physician services? Is the market 'competitive?' Are there pareto-relevant market failures, such that there is room for welfare improving policies? Economists have devoted a great deal of attention to this market, but it remains relatively poorly understood. Some background on early studies of this market is presented. The nature of the product being bought and sold, and of demand, are then characterized, in order to establish the character of this market. The key features of this market are that the product being sold is a professional service, and the pervasive presence of insurance for consumers. A professional service is inherently heterogeneous, non-retradable, and subject to an asymmetry of information between buyers and sellers. These characteristics are what bestow market power on sellers, further strengthened by the fact that consumers face only a small fraction of the price of any service due to insurance. The implications of this for agency relationships between patients and physicians, and insurers (both private and public) and physicians are then discussed. Agency relationships within physician firms are also considered. Both theoretical and empirical modelling of contracting between insurers and physicians and of the joint agency problems between patient and physician and insurer and physician are recommended as areas for future research. Since failures in this market are seen to derive largely from the structure of information, the potential gains from government intervention may be sharply circumscribed.
Article
In health markets, the price paid by insured consumers when health care services are demanded can be set separately from the price paid to providers when services are supplied. This fact suggests two alternate strategies for controlling the costs of health care: demand-side cost sharing, where patients must pay more in co-payments or deductibles, and supply-side cost sharing, which seeks to alter the incentives of health care workers to provide certain services. We review the rationale, limits, and comparative advantage of demand- and supply-side cost sharing in health care while primarily focusing on the short-run pursuit of consumer financial risk protection and efficiency. We then turn briefly to the long-run issue of technology adoption, as well as the how supply- and demand-side cost sharing may affect the fairness of the health system.
Risk Sharing between Health Services Purchasers and Providers
  • F Benstetter
  • A Wambach
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