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Effect of delayed reimbursement on utilization of medical services

December 19, 2011 in Health Care in Developing Nations, Health Insurance, Optimal Ins (Theory) | No comments

A recent paper by Hai Zhong (2011) finds that health insurance that provides immediate reimbursement for health care services significantly increases the likelihood of patients seeking outpatient treatment in China compared to reimbursement beneficiaries with a delay. China isn’t the only country where insurance companies provide delayed reimbursement. In fact, in France patients pay the full cost of physician visits up front and only later are reimbursed 70 percent of the cost.

Why would the delayed reimbursement make a difference? I can think of three reasons.

  1. Liquidity Constraints.  Some individuals may not be able to afford the payment.  Poor individuals may literally not have the capital to pay for these services up front.  Getting loans from formal institutions (e.g., banks) or informal ones (e.g., friends and family) may be costly either in terms of interest of obligations to family and friends.  Even if an individual is rich, acquiring extra money may be costly (e.g., trip to ATM, ATM fees, interest on credit card).
  2. Probability of Non-Payment.  Although may policies are written where payment is assured, in practice reimbursement rates will not be 100 percent.  For instance, individuals could fail to submit the correct forms for reimbursement, they could move addresses, or the patient could die.  In addition, patients may have some uncertainty surrounding the benefits covered and thus they may not be 100% sure that they will receive reimbursement.  Beneficiaries may not trust their insurance plan; they may assume it is trying to cheat them and thus with some non-zero probability the beneficiary will not get paid.
  3. Reflection of value.  Even if a patient is rich and payment probabilities are 100%, the patient may still be less likely to use the service if they don’t need it if they realize the true cost.  Alternatively, patients who realize a service is valuable may also be more likely to use it.
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Smoking Prevention in China

August 30, 2011 in Books, Public Health | 1 comment

“All tobacco companies are state-owned, and the industry provides signifiant revenue; it also directly employs more than half a million people. From the government’s perspective, smoking is important to stability, both economic and social.  Some cigarettes are even subsidized–the cheapest brands cost as little as thirty cents a pack, because officials fear that farmers will become unhappy if they can’t afford to smoke.”

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Malpractice in China

August 17, 2010 in Malpractice | No comments

In the U.S., physicians often fear that if a patient experiences a bad health outcome, the physician will be liable for millions of dollars as part of a malpractice suit.  Although the malpractice system in the U.S. may be far from perfect, most physicians would certainly prefer it over the more informal forms of “malpractice” that have recently been used by patients in China.

“In 2006, the last year the Health Ministry published statistics on hospital violence, attacks by patients or their relatives injured more than 5,500 medical workers…

In June alone, a doctor was stabbed to death in Shandong Province by the son of a patient who had died of liver cancer.  Three doctors were severely burned in Shanxi Province when a patient set fire to a hospital office. A pediatrician in Fujian Province was also injured after leaping out a fifth-floor window to escape angry relatives of a newborn who had died under his care.”

I am not sure whether the U.S. or China is the anomaly.  If physician promising to cure the patient and they either become more ill or die, the patient’s relatives inevitably place a large share of blame on the doctor.  Thus, taking out one’s anger through violence against physicians could be a natural response; fortunately, instances of patient-physician violence in the U.S. are relatively rare.

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Famine is bad for your health

May 20, 2009 in Uncategorized | No comments

A study looking at the effect of the Great Famine:

“Our results indicate that in-utero and early childhood exposure to famine had large negative effects on adult height, weight, weight-for-height, educational attainment and labor supply.”

Not a shocker.

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Informal Payments in Public Healthcare

March 2, 2009 in International Health Care Systems | 3 comments

Healthcare Europa reports that despite being in a public healthcare system, many physicians receive informal payments to supplement their income.

“The top doctors, the ones in managerial positions in hospitals, make 5-10 times their monthly salaries of Euros 1,000 to Euros 2,000 from informal payments. They will also take bribes on any new equipment or facilities – 10% is the going rate.”

From conversations with some Chinese friends, I have heard that in China, it is also common for patients to pay physicians informally in exchange for quicker service or access to better physicians.  If these payments are unreported, this may underestimate the true cost of running a public health insurance system.

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China and Universal Health Care

October 21, 2008 in International Health Care Systems | No comments

The Wall Street Journal reports that China is aiming for Universal Health Care.  The Chinese hope to cover 90% of the population within 2 years, and provide health coverage for all Chinese by 2020. 

“This all stands in contrast to China’s current system, which provides little government funding to government hospitals and requires patients to pay heavy out-of-pocket expenses. The WSJ notes that out-of-pocket payments made up more than 60% of health spending in China at the end of the 1990s…The plan doesn’t address how the government would pay for its nationalization program if hospitals are restrained from earning more and tax collection mechanisms remain weak.”

Are you craving more detailed information about health care in China?  The Lancet, Peking University Health Sciences Centre and the China Medical Board have conducted an in-depth study of health system reform in China.  The series examines topics such as preventive care, public health identification of communicable diseases, health insurance, and patient cost sharing.  The full collection of articles is available here or you can check out the a BBC News summary of The Lancet’s China series.

China is a country of great inequality.  The International Herald Tribune reports that “While life expectancy in Shanghai is 78.1 years, that figure is 66.1 in Gansu, one of the poorest provinces.”  Physicians are often poorly compensated and secure most of their income by over-prescribing lucrative pharmaceuticals to their patients.  ”While the country was plagued by infectious diseases before 1990, chronic illnesses are now the main health problem and accounted for 74.1 percent of all deaths in 2005, up from 47.1 percent in 1973.”

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Influenza Vaccination in China

October 17, 2008 in Current Events, International Health Care Systems, Vaccinations | No comments

In Europe and North America, the influenza vaccination rate is about 20% to 40%.  In China, this figure is only 2%.  The pharmaceutical company Sanofi-Aventis smells opportunity.

China Business Daily reports that Sanofi-Aventi will invest €7 million to build a new vaccination prodction facility in Shenzhen.  The article continues: “after the company’s the pharmaceutical factory in Shenzhen officially put into operation in 2012, the company could sell 2.5 million seasonal influenza vaccine in China.”

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Olympic Post IV: Pauly on Health Insurance in India and China

August 21, 2008 in Health Care in Developing Nations, Health Insurance, International Health Care Systems | Permalink

In the July/August 2008 edition of Health Affairs, health economist Mark Pauly discuss his opinions with respect to the evolution of health insurance in India and China. He notes that in both countries, rising incomes has lead to increased demand for medical care, especially in urban areas. Despite the increased demand for medical care, there has not been nearly as much an increase in health insurance coverage. Out-of-pocket payments as a portion of total health care spending are 80% in India and 60% in China.

This has lead to calls by many politicians to increase “access to care” by increasing health insurance coverage rates. Pauly, cautions that mandating generous health insurance coverage may not be ideal:

“The problem with insurance that ‘improves access’ to care is that such additional use of care will almost surely raise average spending on care and, therefore, the premium that an unsubsidized insurer would have to charge…using regulation to push access and equity that makes insurance seem like a bad buy to its middle-class customers will be undesirable.”

If legislating a more generous insurance benefit package will reduce demand for health insurance, one solution is to have the government provide health insurance for all its citizens. This will increase equity, but could lead to other undesirable outcomes such as rent-seeking behavior, and politically determined medical care decisions. Further, using taxes to fund the public health insurance system could increase “black market” activity. That is,

“Using taxes as a vehicle to make insurance compulsory runs the risk of driving measurable and taxable income underground for people who expect to pay more in taxes from public goods than they will get.”

Dr. Pauly reminds us, that there is no easy way to solve the health care needs facings the citizens of the world’s two largest countries: India and China.

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Olympic Post III: China and India Healthcare Statistics

August 13, 2008 in HC Statistics, International Health Care Systems | Permalink

Below is a side-by-side comparison of health care and economic statistics from China and India.

Category China India
Population 1.33 billion 1.15 billion
Life Expectancy (2008) 73.18 69.25
Infant Mortality Rate (per 1000 live births) 21.16 32.31
GDP (PPP) – 2007 $6.99 billion $2.99 trillion
GDP/capita (PPP) – 2007 $5,300 $2,700
GDP growth – 2007 11.4% 9.2%
GDP/capita Growth (1994-2004) 7.8% 4.4%
% below poverty line (PL) 13.7% 31.1%
% below PL after medical expenses 16.2% 34.8%
Healthcare spending/GDP (1988) 3.3% 3.5%
Healthcare spending/GDP (2002) 5.5% 5.0%
Gov’t health spending/total health spending (1980s) ~30% ~30%
Gov’t health spending/total health spending (2002) ~15% ~15%
Health Insurance Coverage 56% (urban); 21% (rural) 15%
OOP Medical Expense (1990) 21% 70%
OOP Medical Expense (2002) 58% 80%
% of pop. over 65 (2000) 10.2% 7.6%
% of pop. over 65 (2050) 29.9% 20.6%
For-profit hospital market share (2004) 13.8% N/A
For-profit clinic market share (2004) 72.0% N/A
Pop. covered by commercial insurance (2004) 5.6% N/A
Pop. living with HIV/AIDS 5.1 million 0.8 million
HIV/AIDS deaths (2003) 44,000 310,000
Prevalent food and waterbourne diseases: bacterial diarrhea, hepatitis A & E, and typhoid fever bacterial diarrhea, hepatitis A, and typhoid fever
Prevalent vectorborne diseases: chikungunya, dengue fever, Japanese encephalitis, and malaria Crimean Congo hemorrhagic fever, Japanese encephalitis, and malaria
Prevalent animal contact diseases: rabies rabies
Prevalent Water Contact Diseases N/A leptospirosis

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Olympic Post II: Comparing the Health Care Systems of China and India

August 12, 2008 in International Health Care Systems | Permalink

Health Affairs’ July/August 2008 edition discusses the health care system of 2 emerging powers: China and India. Today, I will analyze the two countries health care systems over time and what they they can expect in the future.

Like most developed countries, healthcare spending as a percentage of GDP has risen over time for these two countries. Health care is a luxury good, and the rise in health care spending should be expected due to these countries incomes have increase significantly over the past few decades. Despite the increase in spending, health care is often unaffordable for many individuals. Many individuals do not seek physician care or hospitalization when needed since they cannot afford this care. In both countries, provinces and states with higher levels of GDP per capita have better health care outcomes than provinces and states with lower levels of GDP per capita.

Funding

Overall both countries have experienced a significant shift from government funded health care to privately funded health care. In China, this was mainly due to the transition from a centrally planned to a more market-oriented economy. Government spending decreased from 30% of GDP in 1978 to 10% in 1996 and government health spending fell concurrently. In India, government spending as a percentage of GDP has been between 20-25% for the last 2 decades, but debt payments and pension liabilities have eroded the government’s ability to fund adequate health care.

Health Care Delivery

“China has maintained public ownership over most health facilities, making public provision of care the dominant mode for the majority of services while legitimizing profit-seeking behavior at public facilities through a set of perverse incentives. In contrast, India has followed a policy of benign neglect and allowed entrance into and expansion of the private sector to fill in the gaps, with little effective regulation or enforcement.”

In China, government subsidies for public health facilities fell drastically in the early 1990s and prices for most basic medical were below cost. In order to operate in the black, public hospitals can charge high prices for high-tech tests and pharmaceuticals. “These seemingly sensible cross-subsidies have created perverse incentives for providers, who now have to generate 90 percent of their budget from revenue-generating activities, turning hospitals, township health centers, and village doctors alike into profit-seeking entities. As a result, even though structurally the delivery system of China is public, the behavior of public facilities is consistent with that of for-profit private providers.”

In India, the government pays for most of the care in public facilities, but–like in China–prices are generally low or below cost. The government, however, allows public practitioners to run private practices which means that many providers try to divert their patients to their higher margin, private practice. Yip and Mahal claim that in this environment, “supplier-induced demand is prevalent.”

Quality

In China and India, providers are well known for systematically overprescribing drugs and tests (this is where they make their money). Counterfeit drugs are often used in rural China. In India, it has been shown that even licensed doctors generally provide poor-quality service. Smaller hospitals in India lack basic medical equipment and trained personnel. “The public sector, too, is inefficient, with shortages of drugs and consumables and frequent absenteeism.”

Reform

In China, one major reform is the New cooperative Medical Scheme (NCMS) discussed in the 10 Aug 2008 post. India has introduced the National Rural Health Mission (NRHM) which aims to increase Indian government spending on health to 2% of GDP. The NRHM hopes to expand insurance coverage by establishing risk-pooling schemes. In addition, the Indian government, beginning in 2003, introduced an insurance scheme, heavily subsidized by the central government budget and targeted to the poor. Enrollment is voluntary, and to date the take-up rate is low.”

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