This study, to our knowledge, was the first study to explore the effect of DRGs payment implementation on healthcare services received by elderly at national level, which is a primary area of health care reform at the current stage. We assessed this with analysis of two key indicators of healthcare services (healthcare expenses and cost sharing) to identify the implementation effect of DRGs payment on healthcare and financial protection received by elderly patients. The findings proposed that implementing DRGs payment reform reduce drug expenses but increase treatment expense of chronic disease for elderly patients in China. Additionally, there is no evidences to indicate implementing health insurance reform contribute to reduce hospitalization expense received by elderly. These findings seem to be contrary to the original purpose of health care reform. Additionally, the implementation of DRGs payment reduced the spending of medical insurance fund, while increased the out-of-pocket of patients, revealing a shift in health care costs from medical insurance funds to out-of-pocket and increase financial hardship for elderly.
Our findings provide several insights about the effect of DRGs payment reform on healthcare for elderly. Firstly, our findings provide evidence to indicate implementing DRGs payment increased the treatment expenses of healthcare for elderly patients and did not affect the reduction of hospitalization expenses, which are contrary to the previous evidence from high-income settings, such as the United States and European countries [45], and evidence from other disease predominating in the young population, such as appendicitis [40]. The original intention of implementing DRGs payment in China is to overcome escalating health care costs and improve efficiency and sustainability of health spending, expanding health coverage and access to healthcare. However, our evidences showed that the impact of health payment reform on health care expenses received by elderly patients does not appear to be as expected.
There are several possible explanations for the significant effect of DRGs payment on increasing healthcare expense for elderly patients. First, the essence of health coverage reform is the marketization of health care, requiring hospitals to bear their own profits and losses. Under this payment mechanism, hospital should ensure financial security by making profits from prescribing and dispensing drugs and providing high-technology tests, meanwhile, clinician compensation is tied to those profits. As a results, hospital and clinician may induce patients to use more healthcare tests or more expensive out-of-pocket treatment [40]. Second, due to the decline of physical function and easy to cause multiple diseases, the elderly have an increased frequency of hospital visits, which leads to an increased probability of receiving induced medical consumption and thus a greater propensity to incur higher healthcare expense. Third, the increase in health care costs due to the update of medical technology may also be a potential cause of the increase in health care costs for elderly population, although the increasing healthcare needs and costs of the elderly do not depend on the payment mechanism, it is likely to be a prerequisite for improve healthcare and health equity for elderly population, as it indicates whether public health resources are skewed toward the elderly.
Secondly, we provide rare empirical evidence to explore the health insurance reform effect in financial protection for elderly. One of objective of health reform is to assess the healthcare without financial hardship, hence, it is necessary to explore the effect of DRGs payment on cost sharing. Previous study has indicated implementing DRGs payment contribute to save spending from medical insurance fund and out-of-pocket in high-income settings [31]. This study provided new evidence to support that implementing DRGs payment reduces the spending of medical insurance fund, while increases the spending of out-of-pocket. It means that more of the healthcare burden is shifted from public medical insurance fund to patients, which exacerbates the financial hardship for elderly patients. One potential reason to explain this reducing spending of medical insurance fund is that the use of medical insurance fund affects the performance appraisal of hospitals by the Health Commission, and some hospitals that exceed the medical insurance fund need to pay out of their own pockets. At the same time, hospitals will impose similar requirements on clinicians. Therefore, hospitals will intentionally save the use of medical insurance fund, and some hospitals even regard it as a political task. In this context, hospitals will use less reimbursed drugs and increase the out-of-pocket expense, such as high cost treatment, which will transfer the cost to patients and make patients bear high healthcare expense. Scholars also indicate that with the widespread implementation of DRGs payment, hospital might potentially mitigate cost reductions by transferring the payment burden of elderly and sicker patients, increasing readmission rate, or refusing to admit sicker patients [31].
These findings provide lessons and enlightenment on how to rethink effective implementation strategy for policy to enhance health equity for elderly and achieve UHC. In the following paragraphs, we will share these lessons.
Policy tilt matters. Elderly need frequent access to health care and face high health costs. The per capita health expenditure of the elderly in China showed an increasing trend year by year, from 6223 yuan in 2013 to 8998 yuan in 2020, and is expected to exceed 10,000 yuan in the end of 2023 [46]. Meanwhile, the elderly are more likely to suffer health inequities due to their health status and social vulnerability, thus need more support from public health resources. Although China has made many efforts to reduce the health care costs for elderly population, such as expending health coverage and increasing the financial standard of health reimbursement. However, those policies are not sufficient to establish effective protection mechanisms for elderly populations, especially for elderly in low-income regions. For example, according to the latest policy, the individual contribution of urban elderly medical insurance will be 380 yuan in 2024, while the average pension of these elderly population is only 100 yuan. The elderly are vulnerable to financial hardship due to access to necessary health care services, hence, more policy tilt is needed to help them improve their health care.
Cost sharing is a prerequisite for promoting health equity. The improvement in health will probably depend on who shares and the nature of those benefits. We found implementing DRGs payment reduces spending of medical insurance fund and save public health resources, whereas more health care costs are shifted concomitantly to elderly patients. That means elderly patients bear an increasing burden of health care costs. Although the implementation of DRGs payment most directly impacts the expenditure of public health insurance funds, any health insurance payment method should consider cost-sharing to avoid cost-shifting that could undermine health equity. In China, 130 million elderly population came from rural areas, accounting for 41.53% of the national elderly population [46]. The main income of many elderly population comes from child support, basic old-age insurance payments, or living allowance, and even a small percentage increased in out-of-pocket could limit access to health care or push them into poverty. Hence, public medical insurance fund is the main pathway to help them get the necessary health care services. However, China currently lacks extensive special policies for elderly, who receive the same reimbursement rates as other age groups. Additionally, health insurance reform has not significantly changed the cost-sharing ratios. For example, in Guangxi, the reimbursement rate for urban residents hospitalized in tertiary hospitals remained at 55% during both the FFS and DRGs periods. Although China offers medical assistance to extremely impoverished elderly, this assistance requires proactive application. Due to a lack of awareness about health policies among elderly, they often fail to benefit from these provisions in a timely manner. China’s health reform aims to achieve UHC, that is to ensure people obtain high quality health care without financial hardship, rather than designs to control public insurance fund expenditure. With the aging population, investment in health for elderly population to improve financial protection for elderly is essential to obtain UHC and health equity.
Health care expense is determinant factor. Health care expense is the major driver to determine the access to health care, to achieve UHC, health reform should offer affordable access to health care. Regrettably, our evidences indicate a increasing trend of health care expenses for elderly population after implementing DRGs payment reform. This reflects that the current mechanism of health reform does not address the core problem of improving health care and health equity. Although China is constantly expanding the list of drug reimbursement under medical insurance, some advanced drugs and treatment technologies are not covered by medical insurance, which undoubtedly increases the health care expenses of patients. High drug and treatment costs can lead elderly population to have negative attitudes towards accessing health care services, which will lead to the neglect of primary health care and aggravate health risks.
Based on the underlying discussion above, we propose several policy implications for China and other LMICs facing challenges in health financing, as well as regions experiencing pressure on public funds during the post-COVID 19 pandemic, to enhance health equity in elderly healthcare and achieve the UHC goals.
First, the proportion of medical insurance reimbursement should be more skewed to the elderly. At present, the public health insurance reimbursement rates in China vary depending on the level of the hospital. For example, for elderly individuals covered by rural medical insurance, the reimbursement rates are 60%, 40% and 30% for township or county hospitals, second level hospitals, and tertiary level hospitals, respectively, with various reimbursement restricted conditions. However, elderly in LMICs are already facing financial crises and rely more on public health services. Therefore, policymakers in LMICs should expand the reimbursement rates for health services for elderly and provide a hierarchical reimbursement design based on the age of the elderly. For instance, a separate cost-sharing policy could be established for elderly patients, with reimbursement rates increasing as patients age, thereby reducing their out-of-pocket expenses. Additionally, the reimbursement rate for elderly patients treated at tertiary hospitals should be increased, and the cost compensation for these hospitals should be enhanced to prevent discrimination against elderly patients. Meanwhile, LMICs should cover more commonly used drugs and treatment techniques for elderly in public health insurance. It is particularly important to establish a dynamic reimbursement update mechanism to promptly capture and update commonly used drugs and treatment technologies for elderly to achieve health equity.
Second, improving financial protection for elderly is essential in health reform to achieve health equity in LMICs. Commercial insurance is rarely applicable to the elderly, whose cost sharing primarily relies on public health insurance funds and the out-of-pocket. The increased financial hardship from out-of-pocket expences significantly affects the elderly’s access to healthcare services. International experience indicates that any single health payment method must be integrated with other policies to promote health equity, to reduce the financial hardships elderly individuals face when accessing healthcare services, LMICs should implement additional fiscal policies to mitigate the impact of DRGs payment and increase the allocation of health and financial resources to the elderly. Governments can allocate a larger proportion of health resources to the elderly, develop various forms of medical subsidies tailored to their healthcare needs, and exempt high-aged elderly individuals from personal health insurance premiums nationwide, ensuring that elderly patients receive affordable and effective healthcare services. Additionally, evidences from this study and other such LMICs indicated DRGs payment reform have the potential risk of guiding patients to over-treat and enter higher payment groups. Hence, referring to the experience from other high-income countries, setting the out-of-pocket limit was seen as an important mechanism for elderly financial protection in LMICs. China and other LMICs can set the out-of-pocket maximum for common and serious diseases in the elderly. Setting the out-of-pocket maximum can effectively reduce hospital-induced medical services and avoid shifting healthcare costs to elderly patients.
This study has two strengths. First, most studies used the China health and Retirement Longitudinal Study (CHARLS) data to investigate healthcare services received by elderly, however, the CHARLS data is self-reported and updated every two to three years, recall bias is inevitable. To the best of our knowledge, this is the first study to obtain hospital discharge data from 2013 to 2023 at national level, to explore the effect of health insurance reform on health care and financial protection for elderly using a nationally representative population. Second, in the initial stage of health insurance reform in China, this study provides rare empirical evidences to highlight the health insurance reform should strengthen policy support and financial protection for elderly.
Additionally, our study has several limitations that should be considered. First and foremost, due to the sensitivity and difficulty in obtaining health insurance data, despite our best attempts to expand the sample size, we are still concerned that these findings may not be nationally representative. Therefore, future studies are welcome to include data from more provinces to address this limitation. Secondly, the data coverage of our study spans from 2013 to 2023, which China began planning to promote DRGs payment reform nationwide from 2020. Our study’s sample stared implementing DRGs payment in 2021, so the DRGs payment phase includes data only from 2021 to 2023, leading to data imbalance issues. Although we shortened the study period in robustness checks and used balanced data to verify the stability of our baseline results, this remains a potential limitation of this study. Thirdly, this study only explores the implementation effect of health coverage reform in the initial stage. We recognize that the reform effects are often most significant during the initial implementation stage and may stabilize or change over time. Additionally, the study’s data covered the period of the pandemic, raising concerns about potential biases during this time. Therefore, further evaluation of implementation effects and observation over longer period is needed. Fourthly, due to the extreme difficulty of obtaining health insurance data, our study only focuses on cerebral infarction as a common chronic diseases among the elderly, which may introduce potential sample biases, We welcome future research to include a wider range of disease and investigate the effect of health reform on other elderly diseases, providing a more comprehensive understanding of implementation effects of health reform in China. Finally, this study focuses on the health reform effects of a country like China, which faces challenges in healthcare financing and has a large elderly healthcare service market. Future research can verify and complement our findings by studying similar cases in other LMICs or regions with different healthcare financing backgrounds, offering a broader perspective for global health care.
link