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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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International Healthcare Models: France

June 15, 2010 in Health Care Around the World | 1 comment

Here is my previous review of the French healthcare system.  Below is the some additional information on medical care in France based on the book by William Roth.

Physicians:

  • Physicians generally work out of their own practices rather than in health centers.
  • Physicians choose whether to work in the private sector or public sector.  They cannot work in both.
  • Patients can go to any physician they want among those who work in the public sector.  Those with private insurance can go to any doctor in either the public or private sector.
  • Public physicians are salaried government employees.
  • Private sector physicians operate on a fee-for-service basis.
  • Physician ratio: 1:330

Malpractice:

  • The system is a mix of fault and no-fault.  The general trend over time, however, is towards a no-fault system.
  • Compensation levels for no fault decisions are regulated.
  • Awards come from a national compensation fund supported by premiums.
  • Private practitioners must by malpractice from a private firm.

Hospitals

  • There are 3 types of hospitals: local hospitals provide general care but no surgery, regional hospitals provide more specialized care, and general hospitals provide the widest range of services (e.g., surgery, rehabilitation, LTC).

Funding

  • Payroll taxes fund must of the public sector medical expenses, although there is a shift lately towards general tax revenues.
  • Individuals who want private medical care purchase private health insurance.  Private insurance is an “add-on” to the public insurance, not a replacement.
  • Patients pay for the full cost of treatment upon receipt.  Their local health insurance department reimburses them for the covered expense.

HIT

  • All French citizens carry computerized Smart Cards containing all their medical background.

Source: Roth, WF (2010) Comprehensive Healthcare for the U.S.: An Idealized Model. Productivity Press, 174 pages.

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Does Free Health Insurance increase the poor’s access to medical care?

June 4, 2008 in Health Insurance, International Health Care Systems, Public Policy | Permalink

As mentioned in previous posts, most health insurance in the France public health care system involves significant copayments. While this helps to reduce the moral hazard problem, it may prevent poor individuals from utilizing the care they need. In 2000, France introduced free complementary health insurance plan which covers most out-of-pocket payments for the poorest 10% of French residents. Did this policy change increase utilization?

This is the question analyzed by Grignon, Perronnin and Lavis (2008). The authors note that three groups are effected by this change. This first is the very poor who already paid very few copays due to the existing means tested program (Aide Médicale Générale). The second group of individuals who were eligible for the complementary insurance program previously had commercial insurance, which in France is often used to finance the copayments of the national health insurance system. For the first two groups, we would expect little change in medical utilization. The third group, however, had no commercial or means tested complementary insurance and thus becoming eligible for the new French program likely will have a significant impact on access to care.

Results

The authors do not find a strong positive effect of being eligible for the the free complementary insurance plan, but this is likely because 87% of the sample was previously eligible for means tested benefits. There was some evidence that the utilization of specialist care did increase for the population eligible for the free complementary insurance program. Individuals who enrolled voluntarily into the free plan had significantly higher probability of using all types of care.

The authors summarize their findings concerning the increased utilization of those previously not covered as follows:

“This impact of the free plan on health-care utilization of those previously not covered has three causes: (1) a true price elasticity of demand for health care among the poor: faced with a lower (indeed zero) price, individuals use more care, mostly specialist visits and drugs than when faced with a variety of co-payments averaging 23%; (2) pent-up demand: the change in utilization among those previously not covered reflects the slope of their demand as well as the stock of past unmet needs and can therefore overestimate the longer-run elasticity of demand; and (3) enrolment bias: those who voluntarily enroll may be those who expect to use health care more. “

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Health Care Around the World: France

April 14, 2008 in Health Care Around the World, International Health Care Systems | 18 comments

France is often seen by liberals as the ideal system. It has universal health care, with few waiting lists. France has the highest level of satisfaction with their health care among all European countries. How can this be? What is their secret?

France provides a basic, universal health insurances through large occupation-based funds. The General National Health Inusrance Scheme covers 83% of French workers, while other occupational specific (e.g.: for agricultural workers, for the self employed, for miners, etc.) cover the remainder. About 99% of individuals are covered by this universal health insurance system.

However, France utilizes more market-based ideas than most people realized. Copayment rates for most services are 10%-40%. About 92% of French residents have complementary private health insurance.

In essence, the French system avoids widespread rationing because, unlike true single-payer systems, it employs market forces. Even the OECD says that the “proportion of the population with private health insurance” and the degree of cost sharing are key determinants of how severe waiting lists will be.

Insured. About 99% of French residents are covered by the national health insurance scheme.

Cost. France is the third most expensive health care system (~11% of GDP). While the system has generally been well funded, in 2005 the health care system ran a €11.6 billion deficit and in 2006 the health care system had a €10.3 billion deficit. No centrally planned health insurance system will be immune from occasional (or even frequent) deficits.

Funding. Most of the funding is from a 13.55% payroll tax (employers pay 12.8%, individuals pay 0.75%). There is a 5.25% general social contribution tax on income as well. Thus, there is an approximately a 18.8% on employees for health insurance. There are also dedicated taxes which are assessed on tobacco, alcohol, and pharmaceutical company revenues.

Private Insurance. “More than 92% of French residents have complementary private insurance.” This insurance pays for additional fees in order to access higher quality providers. Private health insurances makes up 12.7% of French health care spending. These complementary private insurance funds are very loosely regulated (less than in the U.S.) and the only stringent requirement is guaranteed renewability. Private insurance benefits are not equally distributed so there is, in essence, a two-tier system.

Physician Compensation. French doctors are paid by the national health insurance system based on a centrally planned fee schedule, but doctors can charge whatever price they want. The fees are based on an up front treatment lump sum, which is similar to DRGs in the U.S. The patient–or their private insurance–must make up the difference between the fee charged by the doctor and the amount paid for by the universal health care system. The average French doctor earns only €40,000, although medical school is free for them and the French legal system is fairly tort-averse.

Physician Choice. The French have a fair amount of choice in which doctors they choose. However, recently the French have moved towards a more “managed care” practice style where patients have a “preferred doctors” who acts as a gatekeeper for specialists.

Copayment/Deductibles. 10% to 40% copayments.

Technology. The government does not reimburse new technologies very generously and because of global budgets and fee restrictions, there is little incentive to make capital investments in medical technology.

Waiting Times. France has generally avoided waiting lists, likely due to the fairly high coinsurance charges. Recent trends towards Increased restrictions, reduced reimbursement rates, and rationing has increased wait times however.

Tanner’s summary. “To sum up: the French health care system clearly works better than most national health care systems. Despite some problems, France has generally avoided the rationing inherent in other systems. However, the program is threatened by increasing costs and may be forced to resort to rationing in the future.”

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