Cost Sharing and Cost Shifting Mechanisms under a per Diem Payment System in a County of China

Fengrong Liu, Jiayu Chen (), Chaozhu Li () and Fenghui Xu
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Fengrong Liu: School of Public Policy & Management, Tsinghua University, Beijing 100084, China
Jiayu Chen: Jiyang College, Zhejiang Agriculture and Forestry University, Zhuji 311800, China
Chaozhu Li: School of Public Policy & Management, Tsinghua University, Beijing 100084, China
Fenghui Xu: School of Labor Economics, Capital University of Economics and Business, Beijing 100070, China

IJERPH, 2023, vol. 20, issue 3, 1-12

Abstract: Cost sharing and cost shifting mechanisms are of vital importance in a prospective payment system. This paper employed the difference-in-differences method to estimate the impacts of a per diem system with inverted-U-shape rates on medical costs and the length of stay based on data from a health insurance institution. The supply side cost sharing mechanism worked so that the new payment system significantly reduced medical costs by 17.59 percent while the average length of stay varied little. After further analyzing the mechanism, we found that heterogeneous effects emerged mainly due to the special rates design. The reform decreased the cases that incurred relatively high medical costs and lengths of stay. However, cost shifting existed so that physicians could be motivated to provide unnecessary services to the patients who should have been discharged before the average length of stay. Therefore, payment rates in the per diem system require a sophisticated design to constrain its distortion to medical service provision even though medical expenditures were successfully contained.

Keywords: per diem payment; supply-side cost sharing; cost shifting (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2023
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