The purposes of this paper are to construct a simulation model for medical costs and to analyse the impacts of changes in hospital price structures on insured patients' and non-insured patients' financial burdens, the profit rate of hospitals and the financial status of insurance carriers. It is hoped that the result of this study would contribute to formulating a more efficient pricing-insurance policy.
Before a simulation model is formulated, the determinants of costs for hospital are analysed based on models of the cost function. The equations which explain the level of medical variables in the model are estimated by econometric methods using time series and cross-section data. Using the model, a base-line simulation is derived as the reference of the comparison. For policy analysis price structures for the insured and non-insured patients, and the ratio of the average net price paid by insured patients to the average gross price of hospitals are selected as policy variables. Different scenarios are assigned to each of these variables, and the future levels of hospital and insurance variables under these scenarios are drived using simulation method.
The major findings from this study are as follows. The pricing policy is effective in increasing the profit rate of hospitals but leads to become serious financial burdens to patients. Also, according to insured patient-days occupancy rate, the effects of pricing policy are various. Insurance policy is effective in increasing the financial status of insurance carriers. The effects of mixed policy is greater than those of each policy. Based on these findings, we can conclude that a proper mix of various policies is both necessary and preferable to balance medical service industry.
