Effects of Thai universal health care coverage on cost efficiency of publicly owned hospitals

Abstract

The paper assesses effects on cost efficiency of the Thai Universal Health Care (UC) program, fully implemented in the fiscal year 2002. Using pre-UC (FY 2000-2001) and UC (FY 2002) samples of regional and general hospitals, the paper estimates stochastic cost frontiers and computes efficiency scores for individual hospitals. Results reveal that hospital respond to an absolute reduction in the capitation-based funding allocation method by improving their operation and management of health care resources. Health care costs could have been potentially reduced between 13.4% and 18.9% had hospitals in the sample, on average, used resources in the most efficient manner. Multiple capitation rates that take hospital type, location and case mix into consideration may alleviate a potential patient-selection bias towards treating less severe patients and/or patient inequity in access to care.