Patient Cost-Sharing and Healthcare Utilization in Early Childhood: Evidence from a Regression Discontinuity Design NCCU Hsien-Ming Lien

Motivations  Investment in health in early childhood is widely believed to have a substantial impact in adulthood (Currie, 2009 ; Currie, 2000; Case and Paxson, 2005; Currie and Madrian, 1999)  In light of that, some countries have subsidized medical care for young children by reducing cost-sharing US: providing children (under 14) the health overage through Children Health Insurance Program 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)

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?  Understanding the magnitude of price elasticity for young children is essential to evaluate these subsidy programs

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 Focus on its impact on the utilization of outpatient care and inpatient care

This paper  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  Regression discontinuity design (RDD) Compare the healthcare utilization for children just before and after their 3 rd birthday Children’s health conditions just before the 3rd birthday should be very similar to those just after the 3rd birthday Isolate the effect of cost sharing from other confounding factors that might affect children’s healthcare utilization

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 (-0.08)  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

Main finding  Co-payment exemptions induce patients to switch from low-cost providers to high-cost providers Most of the increased visits to high-cost providers are for minor illnesses These visits could be treated at low-cost providers  There is little evidence that lower cost sharing has any short-term and long-term impacts on children’s health

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

Change in Expenditure at the 3rd Birthday (Outpatient)

Previous Literature  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.  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.

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.

 But even the estimates of price elasticity for young children is available, these numbers might not be applicable to other Asian countries The average number of outpatient visits per year in Asian countries is generally much larger than that in the states. Taiwan (16, 2004), Japan (17.3, 2003), Korea (11, 2002) U. S. (8.9, 2003)

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 care vs mental illnesses)

Identifications  We exploit a sharp change in cost-sharing at age 3 in Taiwan, due to Taiwan Children Medical Subsidy Program (TWCMS).  TWCMS covers all the co-payments of medical use for children under 3, but the subsidy stops once a child reaches his 3 rd birthday.  The price variation around the 3rd birthday allows us to use a regression discontinuity design (RDD) to examine the causal effect of cost sharing by comparing the spending and use of health care for young children right before and after the 3rd birthday

Background: Patient Cost Sharing (I)

Background: Patient Cost Sharing (II)  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

Age profile of out-of-pocket price (non-emergency care)

Age profile of out-of-pocket price (emergency care)

Age profile of out-of-pocket price (inpatient)

Background: Taiwan Children Medical Subsidy Program  In March 2002, the TWCMS was implemented for the following purpose: Reduce the economic burdens of parents Increase the health care use of children Improve the children’s health  TWCMS each year spent NT1.8 billons for children aged below three on cost sharing Co-payment for outpatient and emergency care (but not the registration fee) Co-insurance rate for inpatient care  A child is no longer eligible for this subsidy program once reaching his/her 3 rd birthday

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

Data  Our sample restricts to children born between 2003 and 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 TWCMS was implemented in There is a change in the reimbursement rate in 2009 for young children.  We exclude Dental services and Chinese medicine, focusing on Western Medicine Health checks provided free by NHI Children who enrolled into NHI for only one year Already waived from cost-sharing (e.g. indigenous families)

Children Characteristics After Sample Selection

Sample Statistics of Health Care Use

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

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) In the health literature, two-part model is proposed to deal with the problem of many zeros. Here, we collapse the health care use of all children in the sample together so that we can measure the health care use by days

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

Results: Outpatient Visits and Spending

Change in Outpatient Expenditure for Young Children

Change in the Number of Visits for Young Children

Average Expenditure Per Visit for Young Children

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 3 rd birthday

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

Robustness Checks

Summarized Results  The estimated arc-elasticity for outpatient care Health spending: Health visits:  Average expenditure per visit also dropped for 2%, after the end of subsidy. But why? The subsidy program encourages the children to go to teaching hospitals for ordinary diseases.

Change in # of Visits for Young Children by Providers

Results: Inpatient Admission and Spending

Summarized Results  The estimated arc-elasticity is insignificant for inpatient care Admissions: Expenditure:  In other words, the demand of inpatient care for young children barely responds to the change of cost sharing

Heterogeneous Treatment Effect  The treatment effect could vary with respect to Gender Birth order Household incomes Diseases

Health effects (still in progress)  Short-run health effect of low cost sharing: Compare the subjective health status reported by individuals right before and after age 3  Long-run health effect of low cost sharing: Use cumulative inpatient rate at age 8 to 10 as proxy of long-run health Compare the individuals experiencing longer period of cost-sharing subsidy during age 0 to 3 with those ineligible for cost-sharing subsidy  There is little evidence suggested lower cost sharing has any short-term and long-term impacts on children’s health

Conclusion  Our study is the first one to identify the demand elasticity of health care for young children.  Our results show The price elasticity for outpatient expenditure is about The price elasticity for outpatient visit is about The price elasticity for inpatient service is very small, almost zero The price elasticity for preventive care or mental illness is quite large while that for URI is small.  No substantial impact on the short and the long term health effects