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Information Asymmetry, Insurance, and the Decision to Hospitalize

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Author Info
Åke Blomqvist (National University of Singapore)
Pierre Thomas Léger () (l’Université de Montréal)

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Abstract

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 consider well -informed patients’ choices of provider when they have conventional insurance so they only pay part of the cost of their health services, as well as the equilibrium strategies of doctors and patients when there is patient-provider asymmetry; in the latter case we also analyze a managed-care insurance setup under which doctors are paid by capitation. We find that under certain plausible conditions, second-best optimal managed-care plans dominate second -best optimal conventional plans that rely on cost control through demand-side cost sharing.

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Publisher Info
Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0305.

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Date of creation: Jun 2003
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Handle: RePEc:nus:nusewp:wp0305

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Related research
Keywords: Primary Care Specialty Care Hospitalization Insurance HMOs Capitation Asymmetric Information.

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Find related papers by JEL classification:
I1 - Health, Education, and Welfare - - Health

References listed on IDEAS
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  1. Rochaix, Lise, 1989. "Information asymmetry and search in the market for physicians' services," Journal of Health Economics, Elsevier, vol. 8(1), pages 53-84, March. [Downloadable!] (restricted)
  2. James R. Baumgardner, 1991. "The Interaction between Forms of Insurance Contract and Types of Technical Change in Medical Care," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 36-53, Spring. [Downloadable!] (restricted)
  3. 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, vol. 77(3), pages 251-77, June. [Downloadable!] (restricted)
  4. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 380-398, Autumn. [Downloadable!] (restricted)
  5. Pierre Thomas Léger, 2000. "Quality control mechanisms under capitation payment for medical services," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 564-586, May. [Downloadable!] (restricted)
  6. Mark V. Pauly, 1979. "The Ethics and Economics of Kickbacks and Fee Splitting," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 344-352, Spring. [Downloadable!] (restricted)
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