Abstract ：
In this paper, we employ two nationally representative individual-level datasets on medical claims from 2001 to 2007 to investigate whether recent medical fee reductions leads to medical suppliers to provide the patients with unnecessary inpatient treatment in Japan. We focus on the differences in provision between medical assistance patients who receive health care services without any contribution or copayment and insured patients in the public health insurance system who pay premiums and make copayments. In this situation, medical suppliers lacking appropriate professional ethnics may provide unnecessary treatments to the beneficial patients who can be unaware of actual medical costs. Given that medical assistance benefits are not randomly assigned but are determined by local government means testing, there may be a sample selection bias in the estimators obtained by conventional econometric analysis. To adjust for this endogeneity, we employ the bias-corrected matching estimator proposed by Abadie and Imbens (2011) and find that medical suppliers provide unnecessary inpatient treatment to both medical assistance beneficiaries and the insured in response to recent reductions in medical fees. Our estimates also suggest: that medical suppliers responded strongest to the larger fee reduction in 2006; that long-term hospitalized beneficiaries are provided with unnecessary treatment; and that unnecessary diagnostic imaging was provided to both beneficiaries and the insured over the entire period. We also find that the apparently larger health care expenditures of beneficiaries is in fact caused by sample selection bias in that medical assistance beneficiaries typically require more inpatient treatment, and not because they are provided with more unnecessary treatment than other patients.

Keywords: Social assistance system, Physician agency, Inpatient treatments, Financial
incentive, Bias-corrected matching estimator, Japan

JEL Classification Number: C21, I13, I18, I38