The Effect of Patient Cost Sharing on Utilization, Health, and Risk Protection

This section describes how I convert the cost sharing formula in Table 1 into actual monthly outof-pocket health expenditures in Table 2. Ideally, I would like to have access to information on actual out-of-pocket expenditures at the individual level (like Medical Expenditure Panel Survey in the US). In the absence of such data, I attempt to derive the same. Fortunately, I know the exact formula for cost sharing (Table 1) and have access to individuallevel insurance claim data, which is the monthly summary of medical expenditures claimed for insurance reimbursement to medical institutions (called the Survey of Medical Care Activities in Public Health Insurance). Since a portion of this monthly total medical expenditure is paid as patient cost sharing, using the formula in Table 1, I can compute the average out-of-pocket medical expenditures at each age for each survey year of the Patient Survey.1 The insurance claim data are monthly, since reimbursements to the medical institutions are conventionally paid monthly in Japan. Thus, the stop-loss is set monthly, rather than annually, unlike the US. The age of patients is measured in years in this data. The steps used to compute the average monthly out-of-pocket expenditures are as follows. Note that the cost sharing formula differs by outpatient visits and inpatient admissions; since inpatient admissions are more expensive and put more financial burden on patients, the coinsurance rate of inpatient admissions tends to be set lower than that of outpatient visits. 1The remaining medical expenditures are paid by insurance societies, the source of this money being a fund of pooled premiums of insured members and assistance from the government.