This paper examines the demand and supply of medical services for the elderly in the health services system characterized by per-month fixed copayment and selective capitation fee scheme for outpatients with chronic diseases. The results indicate that the beneficiary, in particular the household dependent, visits a physician more frequently because the actual copayment decreases for the household dependent, but is nearly the same for the head of the household. Physicians, however, provide more services to the beneficiary partly because of the lowered copayment and partly because of the capitation fee scheme, which they will select instead of the fee-for-service scheme only when capitation is more profitable than Fee-for-Service. As a result, physicians as well as the insured benefit from the health services system.
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