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

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?

LTC insurance use

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

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

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

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.)

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

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

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)

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).

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

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: %

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

Results 1 (prob. to use)

Results 2 (Care expenditure)

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.

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.)

AMI treatment in Japan

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 ,047 patients living in 116 municipal areas matched with regional data.

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

Results on High-techs

Results on Low-techs

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.

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.