Healthcare Crowd-out and Resource Allocation: Evidence from COVID-19 Pandemic

29 Pages Posted: 27 May 2020 Last revised: 2 Jul 2020

See all articles by Manuel Hermosilla

Manuel Hermosilla

Johns Hopkins University - Carey Business School

Jian Ni

Johns Hopkins University - Carey Business School

Haizhong Wang

Sun Yat-Sen University (SYSU)

Jin Zhang

Jinan University

Date Written: July 1, 2020

Abstract

Efficient resource allocation, during a possible new wave of the COVID-19 pandemic and similar public health crisis, requires understanding whether (and to which extent) COVID-related healthcare demand may displace or crowd-out non-COVID care. We study this crowd-out hypothesis using a large sample of online drug retailing transactions in Mainland China which covers the height of the pandemic's first wave (January-February 2020). Since an interaction with healthcare providers is required to purchase prescription drugs (Rx) but not for over-the-counter drugs (OTC), crowd-out can be inferred based on relative Rx/OTC demand changes. Built on a triple-differences (DDD) identification framework, our results are consistent with the presence of crowd-out, estimating it equivalent to a 10% healthcare capacity decrease for non-COVID care at peak. Such a crowd-out effect also varies across different therapeutic classes. This variation is consistent with medically-guided healthcare prioritization. Based on these results we propose and evaluate an α-reserve healthcare capacity reallocation policy, which could be implemented at large scale using tele-health infrastructure. Significant crowd-out reduction could be achieved with limited capacity reallocation.

Keywords: COVID-19, Healthcare Crowd-Out, Differences-In-Differences-In-Differences, Online Drug Retailing, Healthcare Capacity, Rx/OTC

JEL Classification: I1, I14, I18, M3, L3, D60, L86

Suggested Citation

Hermosilla, Manuel and Ni, Jian and Wang, Haizhong and Zhang, Jin, Healthcare Crowd-out and Resource Allocation: Evidence from COVID-19 Pandemic (July 1, 2020). Available at SSRN: https://ssrn.com/abstract=3607594 or http://dx.doi.org/10.2139/ssrn.3607594

Manuel Hermosilla

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Jian Ni (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://https://sites.google.com/site/jiannicmu/

Haizhong Wang

Sun Yat-Sen University (SYSU) ( email )

135, Xingang Xi Road
Guangzhou, Guangdong 510275
China

Jin Zhang

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

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