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Information asymmetry, insurance, and the decision to hospitalize

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  • Blomqvist, Ake
  • Leger, Pierre Thomas

Abstract

In a theoretical model, we analyze the effects of various kinds of demand- and supply-side incentives in the context of a model in which patients and doctors must decide not only on an aggregate quantity of health services to use in treating various kinds of illness, but also have a choice between different kinds of providers (in particular, outpatient services rendered by primary-care physicians or inpatient services provided by hospital-based specialists). We present two broad models, the traditional fee-for-service payment scheme (with an without information asymmetry) and a managed care setup where physicians are paid via capitation. We find that a second-best optimal managed care plan may dominate (under certain conditions) a second-best optimal conventional plan with cost control through demand-side cost sharing.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 24 (2005)
Issue (Month): 4 (July)
Pages: 775-793

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Handle: RePEc:eee:jhecon:v:24:y:2005:i:4:p:775-793

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Web page: http://www.elsevier.com/locate/inca/505560

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References

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  1. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
  2. Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Rochaix, Lise, 1989. "Information asymmetry and search in the market for physicians' services," Journal of Health Economics, Elsevier, vol. 8(1), pages 53-84, March.
  4. Glied, Sherry, 2000. "Managed care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753 Elsevier.
  5. Gravelle, Hugh & Dusheiko, Mark & Sutton, Matthew, 2002. "The demand for elective surgery in a public system: time and money prices in the UK National Health Service," Journal of Health Economics, Elsevier, vol. 21(3), pages 423-449, May.
  6. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
  7. Marinoso, Begona Garcia & Jelovac, Izabela, 2003. "GPs' payment contracts and their referral practice," Journal of Health Economics, Elsevier, vol. 22(4), pages 617-635, July.
  8. Ma, Ching-to Albert & McGuire, Thomas G, 1997. "Optimal Health Insurance and Provider Payment," American Economic Review, American Economic Association, vol. 87(4), pages 685-704, September.
  9. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
  10. Pierre Thomas Léger, 2000. "Quality control mechanisms under capitation payment for medical services," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 564-586, May.
  11. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-98, April.
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Cited by:
  1. de Freitas, Maurício Assuero Lima & Stamford da Silva, Alexandre, 2013. "The influence of the healthcare system on optimal economic growth," Economic Modelling, Elsevier, vol. 35(C), pages 734-742.
  2. Kantarevic, Jasmin & Kralj, Boris, 2011. "Quality and Quantity in Primary Care Mixed Payment Models: Evidence from Family Health Organizations in Ontario," IZA Discussion Papers 5762, Institute for the Study of Labor (IZA).
  3. Michael Leung, 2010. "Primary care delivery, risk pooling and economic efficiency," The European Journal of Health Economics, Springer, vol. 11(2), pages 161-175, April.
  4. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2014. "Payment mechanism and GP self-selection: capitation versus fee for service," International Journal of Health Care Finance and Economics, Springer, vol. 14(2), pages 143-160, June.
  5. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2011. "Treatment and referral decisions under different physician payment mechanisms," Post-Print halshs-00650933, HAL.
  6. David, Guy & Neuman, Mark D., 2011. "Physician division of labor and patient selection for outpatient procedures," Journal of Health Economics, Elsevier, vol. 30(2), pages 381-391, March.
  7. Shinya Sugawara & Jiro Nakamura, 2014. "Incentive for Gatekeepers and Their Demand Inducement: An Empirical Analysis of Care Managers in the Japanese Long-Term Care Insurance," CIRJE F-Series CIRJE-F-916, CIRJE, Faculty of Economics, University of Tokyo.
  8. Ake Blomqvist & Colin Busby, 2012. "How to Pay Family Doctors: Why "Pay per Patient" is Better Than Fee for Service," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 365, October.

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