Supplier-Induced Demand in Japan ’ LTC Market

1. Supplier-Induced Demand in Japan’ LTC Market Satoshi Shimizutani (coauthored with Haruko Noguchi)

2. Motivation (1) • Rapid speed of aging (65+ exceeds 20%) and expansion of LTC costs • LTC expenses: 6.18 trillion yen in FY2004 (75.4 %percent increase from FY 2000, 150% increase for at-home care) • How to operate the LTC market efficiently? How to motivate market participants behave properly?

3. LTC insurance use

4. Motivation (2) • Popular hypothesis: realization of potential demand suppressed before 2000, moral hazard…… • Only lower-income households were eligible to receive LTC provided by the local government under social welfare

5. Motivation (3) • Focus on prevention of moral hazard in LTC providers • Asymmetry of information between suppliers and demanders • Fixed service prices under public insurance program

6. LTC program in Japan • Under the program, once certified, a insured person are free to choose care services (at-home care and institutional care) at a 10 percent co-payment. • More market-oriented policy: allowed for-profit providers to enter the at-home care market for the first time

7. SID-previous research (1) • SID hypothesis: enormous literature Feldstein (1970): positive correlation bet. physician incomes & physician density • Fuchs (1974), Evans (1974),Reinhardt (1978) • Several models: Physician takes advantage of information asymmetry bet. suppliers & demand (due to skilled knowledge etc.)

8. SID-previous research (2) • Physician-induced demand exists when the physician influences a patient’s demand for care against the physician’s interpretation of the best interest of the patient (McGuire (2000)). • Empirical findings are inconclusive. • Identification problem (supplier or demander-induced): Childbirth & Physician density

9. SID-previous research (3) • Two phase model (Rossiter & Wilensky (1984) etc). • 1st phase=probability to use medical service: Effect of higher accessibility • 2nd phase=medical expenditure per patient : Effect of physician-induced demand Escarce (1992) finds the intensity of physicians affects 1st phase but not 2nd phase.

10. SID-previous research (4) • Previous studies in Japan Nishimura (1987): positive correlation bet. medical expenditure and MD density. • Several studies after the 1990s SID observed in Yamada (2002) but not in Suzuki (1998), Kishida (2001) LTC Case (prefecture data): observed in Yamauchi (2003) but not in Yuda (2004)

11. Data • Data: Micro-level data from the “Survey on Long-term Care Users” in 2002 and 2003, compiled by ESRI, Gov. of Japan. • Randomly chosen (response rate: 80%). • HH with one un-institutionalized needy elderly inc. uncertified. • Sample size : around 1,000 in each year. • Matched with density of providers (prefecture level).

12. Summary statistics (1) • Share of care receivers: 60% • At-home care exp./month: \12,000-13,000 • Female:75%, and Age:84 • Care levels 1(20%),2(20%),3(10%) • Brain vein disease, dementia, bone fracture and frail with aging (>20%) • Frequency to go to hospital: 3 days/month

13. Summary statistics (2) • HH income (4-6 bill. yen) and HH assets (30-50 bill. Yen) • # family members: 4.0 • Number of establishments per certified persons in a prefecture: 0.01 (1 establishments for 100 certified) • Share of for-profits: 25-33 %

14. Specification Dependent:dummy variable of i th user’s choice to use LTC service Dependent: logarithmic value of i th user’s expenditure for LTC

15. Results 1 (prob. to use)

16. Results 2 (Care expenditure)

17. Findings • Little evidence on the SID in Japan’s LTC market. A higher portion of for-profits does not induce demand. • Consistent with Yuda (2004) at prefectural data.

18. SID in AMI treatment • AMI (Acute Myocardinal Infarction) High-tech treatment: cardiac catheterization (CATH) and revascularization procedure PTCA (Percutaneous Transluminal Coronary Angioplasty) CABG (Coronary-Artery Bypass Graft Surgery) Low-tech treatment: Acute drug treatments (aspirin, thrombolytic drugs, beta blocker, calcium channel blocker etc.)

19. AMI treatment in Japan

20. SID in AMI treatment: Data • Data: chart-based microdata from Tokai Acute Myocardial Infarction Study (called TAMIS),comparable with Cooperative Cardiovascular Project (CCP) • 2,020 heart attack patients in 14 high-tech and high-volume medical facilities in the Tokai area in 1995-1997. • 1,047 patients living in 116 municipal areas matched with regional data.

21. SID in AMI treatment: Spec. Dependent:dummy variable of i th patient’s choice of s th treatment, CATH, PTCA, or low-tech acute drug treatments. Dependent: logarithmic value of i th patient’s expenditure for s th treatment, CATH, PTCA, or low-tech acute drug treatments.

22. Results on High-techs

23. Results on Low-techs

24. SID in AMI treatment • # of high-tech or high-volumn hospitals and MDs per person are positively correlated with medical expenditure in both phases in PTCA or CABG. • # of low-tech hospitals per persons is positively correlated with medical expenditure in both phases in low-tech treatment.

25. Conclusions and Discussions • Our findings report SID is not observed in LTC but in a high-tech treatment. • One explanation is the degree of information asymmetry • Implications: Maintaining care manager’s skill, further disclose etc.