The Role of Reimbursement Approaches on Healthcare Demand: The Case of Thai Civil Servants Medical Benefit Scheme

This paper examines how a change in the reimbursement process of a health insurance provider affects healthcare demand. Specifically, we examine the effect of the launch of the Direct Billing Payment program (DBP) to the Thai Civil Servant Medical Benefit Scheme on outpatient visits and expenditures. Before the change, its beneficiaries must pay the medical service fees upfront and send the receipts to the government for full reimbursement. This process can take up to several months. The DBP program requires the government to pay the hospitals directly. Effectively, the program frees up the liquidity constraint without changing the medical service prices perceived by healthcare consumers and providers. Using panel patient-level data from a large hospital, we find that the new billing system leads to a moderate increase in the number of outpatient visits, but a large surge in the expenditures, especially for prescription drugs.