Selective contracting and foreclosure in health care markets
AbstractWe analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains active in the market for the non-insured, we show that exclusion leads to anti-competitive effects on this non-insured market. As a consequence exclusion can raise industry profits, and then occurs in equilibrium. Under competitive insurance markets, the anticompetitive exclusive equilibrium survives. Uninsured consumers, however, are now not better off without exclusion. Competition among insurers raises prices in equilibria without exclusion, as a result of a horizontal analogue to the double marginalization effect. Instead, under competitive insurance markets exclusion is desirable as long as no provider is excluded by all insurers.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7576.
Date of creation: Nov 2009
Date of revision:
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Other versions of this item:
- Michiel Bijlsma & Jan Boone & Gijsbert Zwart, 2010. "Selective contracting and foreclosure in health care markets," CPB Discussion Paper 140, CPB Netherlands Bureau for Economic Policy Analysis.
- Bijlsma, M. & Boone, J. & Zwart, G., 2009. "Selective Contracting and Foreclosure in Health Care Markets," Discussion Paper 2009-89, Tilburg University, Center for Economic Research.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-05 (All new papers)
- NEP-COM-2009-12-05 (Industrial Competition)
- NEP-HEA-2009-12-05 (Health Economics)
- NEP-IAS-2009-12-05 (Insurance Economics)
- NEP-REG-2009-12-05 (Regulation)
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