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Provider competition and over-utilization in health care

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  • Jan Boone

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  • Rudy Douven

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    Abstract

    This 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 payer’s and patients’ preferences are aligned.

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    File URL: http://www.cpb.nl/sites/default/files/publicaties/download/cpb-discussion-paper-275-provider-competition-and-over-utilization-health-care.pdf
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    Bibliographic Info

    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 275.

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    Date of creation: Apr 2014
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    Handle: RePEc:cpb:discus:275

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    1. Chalkley, Martin & Malcomson, James M, 1998. "Contracting for Health Services with Unmonitored Quality," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(449), pages 1093-1110, July.
    2. Martin Gaynor & Deborah Haas-Wilson & William B. Vogt, 1998. "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second Best in Health Care Markets," NBER Working Papers 6865, National Bureau of Economic Research, Inc.
    3. David Cutler, 2006. "The Economics of Health System Payment," De Economist, Springer, Springer, vol. 154(1), pages 1-18, 03.
    4. van de Vijsel, Aart R. & Engelfriet, Peter M. & Westert, Gert P., 2011. "Rendering hospital budgets volume based and open ended to reduce waiting lists: Does it work?," Health Policy, Elsevier, Elsevier, vol. 100(1), pages 60-70, April.
    5. Mougeot, Michel & Naegelen, Florence, 2005. "Hospital price regulation and expenditure cap policy," Journal of Health Economics, Elsevier, Elsevier, vol. 24(1), pages 55-72, January.
    6. Amitabh Chandra & Jonathan Skinner, 2012. "Technology Growth and Expenditure Growth in Health Care," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 50(3), pages 645-80, September.
    7. Pope, Devin G., 2009. "Reacting to rankings: Evidence from "America's Best Hospitals"," Journal of Health Economics, Elsevier, Elsevier, vol. 28(6), pages 1154-1165, December.
    8. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262121743, December.
    9. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1829, Harvard - Institute of Economic Research.
    10. Marie Allard & Pierre Thomas Léger & Lise Rochaix, 2004. "Provider Competition in a Dynamic Setting," Cahiers de recherche 04-07, HEC Montréal, Institut d'économie appliquée.
    11. Giuffrida, Antonio & Gravelle, Hugh, 2001. "Inducing or restraining demand: the market for night visits in primary care," Journal of Health Economics, Elsevier, Elsevier, vol. 20(5), pages 755-779, September.
    12. Palfrey, Thomas R & Srivastava, Sanjay, 1991. "Nash Implementation Using Undominated Strategies," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 479-501, March.
    13. Erik Schut & Stéphane Sorbe & Jens Høj, 2013. "Health Care Reform and Long-Term Care in the Netherlands," OECD Economics Department Working Papers 1010, OECD Publishing.
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