Effects of establishing a financing scheme for outpatient care on inpatient services: empirical evidence from a quasi-experiment in China

The relationship between outpatient and inpatient care is central to the current healthcare reform debate especially in developing countries. Despite the importance of this relationship to health policy makers, empirical evidence, particularly evidence that can be interpreted as causal is limited and inconclusive. This paper examines the effects of establishing a financing scheme for outpatient care on inpatient utilization and expenditure in China’s Urban Employee Basic Medical Insurance scheme. Under a quasi-experimental design, we use a unique administrative insurance claim dataset and conduct a difference-in-differences analysis. Our results indicate that after the policy change, total number of admissions and total inpatient expenditure of the enrollees decreased by 0.47% and 6.05% respectively, which imply outpatient and inpatient care are substitutes, and the reduction in cost-sharing can release the underuse of the outpatient care, so as to reduce those excessive demands for inpatient care. Moreover, we present evidence that the effects on the admissions of Ambulatory Care Sensitive Conditions which should be sensitive to outpatient care intervention are relatively limited because of the lower reimbursement cap, inadequate capacity of the local primary care providers and stickiness in patients’ healthcare-seeking behaviors. While the enrollees aged over 55 and retirees are more vulnerable to the medical prices, and the enrollees living in the central districts are more responsive because of the better and more accessible primary care.