Price and income effects of hospital reimbursements.

Journal Article (Journal Article)

Health insurance systems in many countries reimburse hospitals through fixed prices based on the diagnosis-related groups (DRGs) of patients. We quantify the effects of price and income changes for the full spectrum of hospital services as average and heterogeneous elasticities of quantities (number of admissions) and quality-related outcomes. For our empirical analysis, we use data on over 160 million hospital admissions, constituting the universe of hospital admissions in Germany between 2005 and 2016. Our identification strategy is based on instruments exploiting a two-year lag in regulatory price setting. The strategy lends itself to a placebo test demonstrating that our instruments do not have substantive anticipatory direct effects. We find that the compensated own-price elasticity of quantity is positive (0.2), while the income elasticity is negative (-0.15). On net, increasing all prices increases costs due to a behavioral response of larger quantities in addition to the mechanical increase.

Full Text

Duke Authors

Cited Authors

  • Bäuml, M; Dette, T; Pollmann, M

Published Date

  • January 2022

Published In

Volume / Issue

  • 81 /

Start / End Page

  • 102576 -

PubMed ID

  • 34923343

Electronic International Standard Serial Number (EISSN)

  • 1879-1646

International Standard Serial Number (ISSN)

  • 0167-6296

Digital Object Identifier (DOI)

  • 10.1016/j.jhealeco.2021.102576


  • eng