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Information Asymmetry, Insurance, and the Decision to Hospitalize

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  • Åke Blomqvist

    ()
    (Department of Economics, University of Western Ontario)

  • Pierre Thomas Léger

    ()
    (IEA, HEC Montréal)

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

Paper provided by HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 01-03.

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Length: 25 pages
Date of creation: May 2001
Date of revision:
Handle: RePEc:iea:carech:0103

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Postal: Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7
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Keywords: General Care; Specialty Care; Hospitalization; Insurance; HMOs; Imperfect Information.;

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References

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  1. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
  2. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 26(2), pages 281-98, April.
  3. Marinoso, Begona Garcia & Jelovac, Izabela, 2003. "GPs' payment contracts and their referral practice," Journal of Health Economics, Elsevier, Elsevier, vol. 22(4), pages 617-635, July.
  4. Ching-to Albert Ma & Thomas G. McGuire, 1995. "Optimal Health Insurance and Provider Payment," Papers, Boston University - Industry Studies Programme 0059, Boston University - Industry Studies Programme.
  5. 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, American Economic Association, vol. 77(3), pages 251-77, June.
  6. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, Elsevier, vol. 5(2), pages 129-151, June.
  7. Glied, Sherry, 2000. "Managed care," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753 Elsevier.
  8. Rochaix, Lise, 1989. "Information asymmetry and search in the market for physicians' services," Journal of Health Economics, Elsevier, Elsevier, vol. 8(1), pages 53-84, March.
  9. 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, Elsevier, vol. 21(3), pages 423-449, May.
  10. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, Elsevier, vol. 10(4), pages 411-432.
  11. Pierre Thomas Léger, 2000. "Quality control mechanisms under capitation payment for medical services," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 33(2), pages 564-586, May.
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Citations

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Cited by:
  1. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2011. "Treatment and referral decisions under different physician payment mechanisms," Post-Print, HAL halshs-00650933, HAL.
  2. 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, Springer, vol. 14(2), pages 143-160, June.
  3. David, Guy & Neuman, Mark D., 2011. "Physician division of labor and patient selection for outpatient procedures," Journal of Health Economics, Elsevier, Elsevier, vol. 30(2), pages 381-391, March.
  4. Boris Kralj & Jasmin Kantarevic, 2013. "Quality and quantity in primary care mixed-payment models: evidence from family health organizations in Ontario," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 46(1), pages 208-238, February.
  5. 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, C.D. Howe Institute, issue 365, October.
  6. Michael Leung, 2010. "Primary care delivery, risk pooling and economic efficiency," The European Journal of Health Economics, Springer, Springer, vol. 11(2), pages 161-175, April.
  7. de Freitas, Maurício Assuero Lima & Stamford da Silva, Alexandre, 2013. "The influence of the healthcare system on optimal economic growth," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 734-742.
  8. 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, Faculty of Economics, University of Tokyo CIRJE-F-916, CIRJE, Faculty of Economics, University of Tokyo.

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