The welfare effect of co-payment adjustments on emergency department visits in medical centers: Evidence from Taiwan

Abstract

This study investigates the welfare effect of copayment adjustments on emergency department (ED) visits in medical centers under the National Health Insurance (NHI) program in Taiwan. To this end, we first applied the smooth time-varying co-integration model to estimate the time-varying price and income elasticities of ED care demand in medical centers, and then welfare effects of various copayment adjustments were simulated. Our empirical results suggested that an upward adjustment in copayment neither cause a potential pricing-out effect nor generate a significant amount of welfare gain, despite there exists a negatively long-run relationship between copayment and ED care utilization in medical centers. Nevertheless, the share of non-urgent ED visits is positively correlated with both the negative time-varying price elasticities and welfare gain. These findings serve as important evidence to validate the application of the copayment as a strategic policy instrument to moderate both non-urgent ED care utilization and welfare loss due to moral hazard behavior under Taiwan’s NHI program.