Discussion Paper No.1305

Abstract :
We use two national individual-level claim data sets to examine the strategic behaviors of beneficial patients of the medical assistance system and medical suppliers by investigating the existence of an ex-post moral hazard and physician agency problem in the medical assistance system in Japan. Since social assistance benefits including medical assistance benefits are not randomly assigned but are determined via means testing by the local government, we apply the bias-corrected matching estimator to adjust for the sample selection bias. There are three major findings. First, we find that access regulations for beneficiaries control the ex-post moral hazard for the first-month visit, but have no effect on visits in subsequent months. Second, we find that medical suppliers provide beneficiaries with unnecessary treatments. Third, medical suppliers respond to fee reductions and provide patients with unnecessary treatments in the long term. The results suggest that scrupulous system design that considers incentives for patients and medical suppliers is needed to improve the efficiency of health care systems.

Keywords :Ex-post moral hazard, Physician agency, Medical Assistance system, Sample selection bias, Bias-corrected matching estimator, Japan

JEL Classification Number: C21, I13, I18, I38