Freeman Spogli Institute for International Studies Program on Energy and Sustainable Development Stanford University


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Patient Copayments, Provider Incentives and Income Effects: Theory and Evidence from China’s Essential Medications List Policy

Working Paper

Brian K. Chen - Arnold School of Public Health at University of South Carolina
Karen Eggleston - Shorenstein Asia-Pacific Research Center at Stanford University and National Bureau of Economic Research

Issued by
Asia Health Policy Program working paper # 37, September 19, 2013

How do demand- and supply-side incentives interact, when there are potentially large provider income effects? We develop a simple model and empirically test it with data from China’s Essential Medications List (EML) policy, which reduced patient copayments and changed provider incentives by removing a large source of revenue from primary care providers: drug dispensing revenues. Using a panel of patient-level spending and clinical data for Chinese patients with diabetes or hypertension over two and a half years, we find evidence of strategic provider response that dampened the impact of patient copayment reductions. Resource use and patient out-of-pocket spending did not change, when taking account of patient utilization outside primary care.