In a major policy shift away from direct public provision of health care, the Indian government is expanding health insurance programs that contract private hospitals for service delivery and pay them at fixed rates for services. However, the behaviour of private hospitals within these programmes is not well understood.
Using over 1.6 million insurance claims and 20,000 patient surveys, and exploiting a policy-induced natural experiment that changed hospital reimbursement rates, this paper provides the first large-scale evidence on the behaviour of private hospitals within public health insurance in India.
It shows that:
- Private hospitals engage in coding manipulation to increase revenues at government expense. Manipulation is highly responsive to changes in the relative reimbursement rates of similar services.
- Hospitals charge patients for care against program rules. Increasing reimbursements reduces these charges significantly, but hospitals capture about half the increased reimbursements. Pass-through is lower in more concentrated markets and I find no evidence of changes in quality or patient composition that could explain incomplete pass-through.
- An INR 1,000 increase in government spending leads to a 5% increase in service volume. The findings illustrate the critical role of reimbursement rates (prices) and market structure in shaping hospital behaviour and provide broader insights on contracting the private sector for delivery of social services.
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Meeting ID: 948 5904 4609