Copayment Adjustments Under Bundled and Two-Tiered Pricing: Welfare Implications for Outpatient Care in Taiwanese Hospitals

This study investigates the welfare implications of copayment adjustments on non-prescription drug services and prescription drugs provided through outpatient care in Taiwan's hospitals under the bundled and 2-tiered pricing scheme. The novelty of this study lies in its analysis of the welfare effects of outpatient copayments under this pricing structure. Structural change models were employed to estimate the welfare effects of copayment adjustments. The analysis reveals that higher copayments prior to physician consultations may lead to a pricing-out effect for low-income individuals in medical centers, while the impact is negligible in regional hospitals. The estimated willingness-to-pay (WTP) for an outpatient visit involving regular and refillable prescription drugs in medical centers is approximately NT$2024 (95% CI: [1978, 2072]) and NT$2312 (95% CI: [2267, 2357]), respectively. These values are 1.71 to 1.87 times higher than the WTP for comparable outpatient visits in regional hospitals, with estimates for regular (NT$1078; 95% CI: [1045, 1111]) and refillable prescription drugs (NT$1353; 95% CI: [1304, 1400]). The WTP for prescription drugs bundled within an outpatient visit ranges from NT$939 (95% CI: [908, 971]) to NT$1210 (95% CI: [1174, 1244]) in medical centers and from NT$308 (95% CI: [293, 322]) to NT$544 (95% CI: [514, 574]) in regional hospitals. Additionally, the share of deadweight loss (DWL) per outpatient visit attributable to regular prescription drugs (with a cost-sharing scheme) ranges from 14.58% to 31.15%, which is significantly lower than that attributable to refillable prescription drugs (without a cost-sharing scheme), ranging from 17.32% to 42.80%. Our findings highlight the underestimation of welfare effects from copayment policy changes and emphasize the 2-tiered scheme as an effective approach to mitigating DWL in outpatient care utilization in Taiwan's hospitals.