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Medical Insurance and Free Choice of Physician Shape Patient Overtreatment. A Laboratory Experiment

Author

Listed:
  • Steffen Huck

    (Wissenschaftszentrum Berlin für Sozialforschung (WZB))

  • Gabriele Lünser

    (University College London - Centre for Economic Learning and Social Evolution (ELSE))

  • Florian Spitzer

    (Department of Economics, Vienna Center for Experimental Economics (VCEE), University of Vienna)

  • Jean-Robert Tyran

    (Department of Economics, Copenhagen University)

Abstract

In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients in a stylized way, we study the effects of medical insurance and competition in the guise of free choice of physician. Medical treatment is an example of a credence good: only the physician (but not the patient) knows the appropriate treatment, and even after consulting, the patient is not sure whether he got proper treatment or got an unnecessary treatment, i.e. was overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated.

Suggested Citation

  • Steffen Huck & Gabriele Lünser & Florian Spitzer & Jean-Robert Tyran, 2014. "Medical Insurance and Free Choice of Physician Shape Patient Overtreatment. A Laboratory Experiment," Discussion Papers 14-19, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:1419
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    More about this item

    Keywords

    Credence good; Patient; Physician; Overtreatment; Competition; Insurance; Moral hazard;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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