Top-up design and health care expenditure: Evidence from cardiac stents

Since 2006, Taiwan’s National Health Insurance (NHI) has covered the full cost of baseline treatment in cardiac stents (bare-metal stents, BMS). Still, it requires patients to pay the price difference for more expensive treatment (drug-eluting stents, DES). Within this “top-up” design, we study how hospitals responded to a 26% cut of the NHI reimbursement rate in 2009. In contrast with hospitals with no previous revenue from stent treatment, hospitals that were more revenue-dependent on cardiac patients reduced the likelihood of stent implantation by 21.2%, increased BMS usage per stent patient by 0.10 or 11.9% but not DES usage. Furthermore, while the average DES price remains insensitive to the rate cut across the whole sample, minor teaching hospitals previously more dependent on stent patients increased the DES price and therefore could recoup at least half of the revenue loss from the NHI rate cut in 2009-2010. In general, the rate cut was effective in reducing NHI expenditure without substantial changes in patient outcomes, although some minor teaching hospitals made moral hazard adjustments in response.