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KCE Reports 80S Maximum Billing Supplement 135
6 INTRODUCTION
The introduction of a ceiling on co-payments can influence behaviour of patients and
providers. The ceiling introduces a bend in the budget line – the nominal price per unit
diminishes or becomes zero after a specified amount of medical care is bought within a
specified period.
It is well-known that individuals react to price changes. This is confirmed in a recent
review 1 : having insurance leads to a higher utilization of services whereas an increase in
cost-sharing leads to a decrease. Although there is clearly an impact of changes in costsharing
on the probability of seeing a doctor and on the probability of having a hospital
stay, the strength of the effect differs between different types of care. General
practitioners as well as drugs seem most affected; hospital care and specialist care least.
In case of a deductible, we also expect patients will consume more when they face a
lower price. Providers can also increase consumption and/or price. However, given
uncertainty in the consumption of medical care, it is not clear when this reaction will
take place. Keeler and Rolph (1988) 2 see three different possibilities: myopic behaviour,
rational behaviour and inflexible behaviour. Patients can react and increase consumption
only after exceeding the limit when co-payments are reduced or absent. Patients in this
case act in a myopic way; decisions are always based on the current OOP price. Before
reaching the maximum billing expenditure, the usual OOP price guides behaviour. After
reaching the limit, patients will start consuming more because of (nearly) free care.
Rational behaviour occurs when patients anticipate they will exceed the limit and
increase consumption once they expect to reach the limit. In such a case, the current
OOP price is not a complete guide to behaviour. Families will also look at the effect of
current spending on future prices; expenditures in the range below the deductible
reduce the remaining deductible and, hence, there will be a greater chance to exceed
the deductible. Therefore, current consumption reduces the expected costs of future
medical care. Consequently, the patient will adapt his behaviour according to his
expectation of (not) exceeding the deductible: when he expects to exceed it, he will act
as if he is fully insured and vice versa. Although consumption of medical care is fraught
with uncertainty, in this case the individual should have some general idea about the
evolution of his consumption, and more specifically the co-payments included in the
MAB-counter. When rational behaviour occurs, this can also include what Bakker 3
(cited in Ministerie van Volksgezondheid, Welzijn en Sport, 2001 4 ) calls a ‘postponing’
effect: patients who expect to generate high expenditures at the end of an accounting
period will try to shift these to the beginning of the next accounting period because
they will then enjoy ‘(nearly) free care’ during a longer time span. Finally, inflexible
behaviour relates to the situation where the behaviour of the patient is not affected.
The initial coinsurance rate continues to guide behaviour because patients are unaware
of the lower price (because of informational problems) or do not respond to it (which
is less likely, given the empirical findings of price effects).
Similar to patients, also providers can change their behaviour, if they know patients have
exceeded their limit. In general they can induce consumption or also change prescribing
behaviour (e.g. less generic or cheap drugs) or change their attitude towards charging
co-payments.
In the next paragraph, we will look at the empirical evidence of the impact of
price/coinsurance on the demand for medical care in case of a deductible on the basis of a
literature review. Next we will propose a methodology for our empirical work. Empirical
results for Belgium are presented in chapter 5 of the main text.