Health Insurance

How Immediate vs. Delayed Reimbursement Affects Utilization

Insurance schemes offer two types of reimbursement to beneficiaries for health care services: immediate reimbursement and delayed reimbursement.  In the former, the patient only pays the copayment or deductible, the insurer reimburses the providers directly for their services.  In the latter case, the patient pays for the full cost of care and is only later reimbursed.  I have written that delayed reimbursement—as long as the delay is not long and the program is efficiently administered—can decrease healthcare utilization without imposing significant financial constraints on patients.  The French system is often given as a model.

Why would delayed reimbursement decrease healthcare utilization?  A paper by Zhong (2011) gives 4 reasons:

  • The probability if reimbursement is less than 1.  This is especially problematic in developing countries where trust in insurance schemes is low.
  • Delay in reimbursement.  Delays may cause liquidity constrained individuals to have to reduce spending elsewhere .  Thus, individuals will be less willing to forego current consumption to pay for health expenditures.
  • Transaction costs.  The process of reimbursement may generate considerable time and monetary costs for the insured
  • Uncertainty.  The complexity of cost sharing arrangements of some health insurance plans may cause confusion among insured about what can and cannot be reimbursed, and how much will be reimbursed

In developing countries, the relative benefit of immediate compared to delayed reimbursement can differ from developed countries.

The authors use data from the 2008 pilot of China Health and Retirement Longitudinal Study (CHARLS).  The survey examines residents of China aged 45 and older.  This survey is conducted biennially under the direction of Peking University, University of Southern California, and University of Oxford.

Using these data, the authors find that immediate reimbursement significantly increases the likelihood of patients seeking outpatient treatment in China.


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