The visit fees and its influence on overalL health expenditureS – the case of the Czech Republic

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Technical university of Liberec, Czech Republic
Technická Univerzita v Liberci
The goal of the paper is to develop a simple demand model of health care services that can explain why the demand for health care services, and hence overall expenditures on health care, can rise with the introduction of visit fees based on real data available publicly in the Czech Republic. One of the most common problems with the costs of health care systems around the world is that they tend to increase expenditures at a rate that is greater than the rate of inflation. This has led to the introduction of visit fees by governments and/or public, private health care facilities and other health care providers. These fees are meant to rationalize the use of the health care system and slow the growth of health care expenditures. The Ministry of Health of the Czech Republic introduced from 1. January 2008 visit fees as a way to slow the growth of health care expenditures. On the contrary, total health care expenditures increased after the introduction of visit fees. A model of visits and visit intensity is developed, where visits and visit intensity are substitutes. The model shows that the demand for health care services will increase with an increase in the price of visits when the cross price elasticity of demand for visit intensity outweighs the own price elasticity of visits. The fees were abolished with the exception of fee for emergency room visit from 2015. The introduction of a visit fee is a counterproductive rationing device for health care services if it rations a component of overall health care services with a low own price elasticity of demand without rationing a substitute variable (visit intensity) with a higher cross elasticity of demand. Thus, the introduction of a visit fee may induce a sense of entitlement for further health care services per visit on the part of consumers, leading to an increase in overall health care expenditures.
health care, demand price elasticity, visit fees, service intensity, rationing device