Provider competition and over-utilization in health care
AbstractThis paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We show that CfM is optimal if the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether patients react to decentralized information on quality differences between providers and whether payerâ€™s and patientsâ€™ preferences are aligned.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 275.
Date of creation: Apr 2014
Date of revision:
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L5 - Industrial Organization - - Regulation and Industrial Policy
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-05-04 (All new papers)
- NEP-COM-2014-05-04 (Industrial Competition)
- NEP-CTA-2014-05-04 (Contract Theory & Applications)
- NEP-HEA-2014-05-04 (Health Economics)
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