Cost-Sharing and Healthcare Utilization in Early Childhood: Evidence from Regression Discontinuity Design

1. Patient Cost-Sharing and HealthcareUtilization in Early Childhood: Evidence from a Regression Discontinuity Design Ming Lien NCCU CASBSFellow (2017-8)

2. Motivations • Since the seminal work by Arrow (1963), moral hazard has become one of the most important factors in designing the health insurance policy. • There have been many attempts to quantify the size of moral hazard. Nonetheless, most of these estimates focus primarily on adults • Two famous randomized experiments • Rand experiment: children and adults (aged less than 65) • Oregon experiment: low income, uninsured adults aged 19-64 • Several recent studies have used the quasi-experimental design to examine the effect of cost-sharing on the health care for adults and the elderly (Chandra, 2010a; Chandra, 2010b; Chandra, 2012; Hitoshi, 2013), but none of them focused on the young children.

3. Motivations • Quite a few countries have subsidized medical care for young children by reducing cost-sharing • US: expanding Medicaid to provide children (under 14) the health overage (e.g. CHIP) • Japan: reducing the copayment for young children (aged less than 6) by 50%. • Taiwan: waived the copayment of national health insurance for young children (aged less than 3) • Investment in health in early childhood is widely believed to have asubstantial impact in adulthood (Currie, 2009 ; Currie, 2000;Case and Paxson, 2005; Currie and Madrian, 1999)

4. Motivations • While these programs are generally well received, it remains unclear to what extent young children can benefit from the subsidy on cost-sharing. • Do young children obtain more health care in face of a lower demand price? • If yes, is there evidence showing their health improves after the increase of medical use? • What are the services responding more to a low cost sharing?

6. Motivations • But even the estimates of price elasticity for young children is available, these numbers might not be applicable to Asian countries • The average number of outpatient visits per year in Asian countries is generally much larger than that in the states.

8. This paper • Exploit a cost-sharing subsidy that exempted all co-payment and • Co-insurance rate for children under age 3 in Taiwan since March 2002 • Children lose their eligibility for cost-sharing subsidy after their 3rd birthday • The unique setting allows us to isolate the effect of cost sharing from other confounding factors so that we can study its impact on outpatient care and inpatient care • Use administrative claims data that consists of all medical records for 410 thousands children born in 2003 to 2004 • Follow them from their 2nd birthday to 4th birthday

9. Change in # of Visits at the 3rd Birthday (Outpatient)

10. Change in Expenditure at the 3rd Birthday (Outpatient)

11. Main finding • Children’s utilization for outpatient care is modestly price sensitive • Cost sharing subsidy significantly increases children’s utilization of outpatient care • The price response is similar across non-emergency care and emergency care • The implied price elasticity of medical expenditure for non-emergency care (emergency care) is around -0.12 (-0.08) • Co-payment exemptions induce patients to switch from low-cost to high-cost providers • Most of the increased visits to high-cost providers are for minor illnesses

12. Main finding • Children’s utilization for inpatient care does not respond to price • The estimated price elasticity of medical expenditure for inpatient care is close to zero • There is little evidence that lower cost sharing has any short-term and long-term impacts on children’s health

13. Previous Literature • Numerous studies attempted to estimate the demand elasticity of health care (For the review see Einav and Finkelstein • Estimates on the price elasticity of health use still relies on results from the Rand Health Insurance Experiment (HIE), a social experiment conducted between 1977 and 1982 that randomly assigned enrollees to insurances of different levels of cost-sharing (from free care (0%) to full cost (95%)) to mitigate the concern of endogenous patient cost-sharing.

14. Previous Literature • HIE findings • The health expenditure increases about 50% from the full cost to the free care coverage • The demand elasticity for adults is about -0.2, and -0.1 for children (under 14). • No precise estimates is provided for young children given the small sample size.

15. Previous Literature • Davidoff (2005) used the SCHIP program expansion to estimate the use of health care for children (under 14). Results indicate that children of chronic conditions increased their use after obtaining the public coverage, though none of estimates are statistically significant • Several recent studies have used the quasi-experimental design to examine the effect of cost-sharing on the health care for adults and the elderly (Chandra, 2010a; Chandra, 2010b; Chandra, 2012; Hitoshi, 2013), but none of them focused on the young children.

16. Research Question • How does a lower cost-sharing affect health use of young children? • Moreover, does the health use of young children respond differently to cost-sharing with respect to • Income groups • Types of services (e.g. outpatient vs inpatient) • Types of diseases (e.g. acute carevs mental illnesses)

20. Performance of Taiwan health system

21. Taiwan National Health Insurance • Taiwan implemented a compulsory national health insurance (NHI) in 1995 (the coverage rate is 99%). • NHI is a single payer system run by the government (similar Canada) that provides the comprehensive benefits covering • Outpatient care • Inpatient care • Prescription drug • Dental care • Chinese Medicine • Counselling service • Nursing care

22. Access of care in Taiwan • Access of care in Taiwan is easy. One can go to any provider covered by NHI (clinics: 93%; hospitals: 99%). • No primary doctors. One can go to any specialists without a referral.

23. How to get a doctor’s appointment

24. How to get a doctor’s appointment

25. How to get a doctor’s appointment

26. Background: Taiwan Children Medical Subsidy Program • In March 2002, the TWCMS was implemented for the following purpose: • Reduce economic burdens of families with children • Increase the health care use of children • Improve the children’s mental and physical health • Each year TWCMS spent NT1.8 billons for children aged below three • Co-payment for outpatient and emergency care • Co-insurance rate for inpatient care • A child is no longer eligible for this subsidy program once reaching his/her 3rd birthday

27. Background: Patient Cost Sharing (II)

28. Background: Patient Cost Sharing (II)

29. Background: Patient Cost Sharing (II)

30. Background: Patient Cost Sharing (I) • Outpatient care • Fixed co-payment and registration fee • Its amount varies with respect to types of providers. In general, a better provider charge a higher copayment and registration fee • Inpatient care • Fixed coinsurance rate • The coinsurance rate depends on the length of stay, but not the types of health providers. • NHI has a annual maximum out-of-pocket expense (stop-loss) for inpatient admissions (NT52000 in 2012) • No deductibles for NHI

31. Data • We use claims data from Taiwan's National Health Insurance Database (NHID) • NHI is compulsory so NHID covers all individuals in Taiwan • Claim records of inpatient, outpatient and emergency care use • Detailed information about cost-sharing, health care use and medical expenditure • More importantly, our data record the exact date of outpatient visits, inpatient admissions, and children’s birthdays. Therefore, we can precisely measure when the children are eligible (in days) for subsidy program, essential for RD design

32. Data • Our sample restricts to children born between 2003 and 2004. We track their health care use from the first day after 2nd birthday to the first day of 4th birthday (2*365 days). Thus, we use NHID data between 2005 and 2008. • TWCMS was implemented in 2002. • SARS in 2003 • There is a change in the reimbursement rate in 2009 for young children.

33. Children Characteristics After Sample Selection • All Taiwanese children born in 2003 and 2004 (435,206 children) • Exclude: • Dental services and Chinese medicine, focusing on Western Medicine • Health checks provided free by NHI • Children do not enroll in NHI continuously at age two and three • Children already waived from cost-sharing (e.g. indigenous families) • Final sample size: 410,517 children

34. Children Characteristics After Sample Selection

35. Sample statistics

36. Sample statistics

37. Empirical Specification We estimate the following RD regression: • is the outcome of interest for the child i • outpatient visits or inpatient admissions • total spending on outpatient or inpatient care • is an indicator equaling to one if i is age 3 or older • is smooth function of age with parameter vector that accommodate the age profile of outcome variables • is an error term that reflects all other factors affecting outcome variables • represents the causal effect of cost sharing on children‘s health care spending and use

38. Empirical Specification Problems (I) • A large portion of children do not have health care use with a short period of time • Many zeros result in a huge problem in the estimation (e.g. cannot take log) • We collapse the health care use of all children in the sample together so that we can measure the health care use by days

39. Empirical Specification Problems (II) • Separate the sharp jump from non-linear functional forms • Lee and Lemieux (2010) suggests two ways to estimate parameters of interest in RD design • polynomial regression: estimating age profile using all of available data and a parametric function (e.g., 3th order polynomial) • local linear regression: estimating the age profile over a narrower range of data (choosing specific bandwidth) by using linear regression • We will use local linear regression as the main specification, and global polynomial regression as the robustness check

40. Change in the Number of Visits for Young Children

41. Change in the Number of Visits for Young Children

42. Change in Outpatient Expenditure for Young Children

43. Average Expenditure Per Visit for Young Children

44. Results: Outpatient Visits and Spending

45. Results: Outpatient Visits and Spending

46. Results: Outpatient Visits and Spending

47. Results: Outpatient Visits and Spending

48. Robustness Checks • Children might visit doctors more in face of the ending of subsidy program • Check if our estimates are robust when dropping points very close to the 3rd birthday

49. Change in # of Visits at the 3rd Birthday (Outpatient)

50. Robustness Checks