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Information Asymmetry, Insurance, and the Decision to Hospitalize

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  • Åke Blomqvist

    (National University of Singapore)

  • Pierre Thomas Léger

    ()
    (l’Université de Montréal)

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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Bibliographic 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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Keywords: Primary Care; Specialty Care; Hospitalization; Insurance; HMOs; Capitation; Asymmetric Information.;

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References

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  1. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-98, April.
  2. Ma, Ching-to Albert & McGuire, Thomas G, 1997. "Optimal Health Insurance and Provider Payment," American Economic Review, American Economic Association, vol. 87(4), pages 685-704, September.
  3. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
  4. 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.
  5. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
  6. Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Marinoso, Begona Garcia & Jelovac, Izabela, 2003. "GPs' payment contracts and their referral practice," Journal of Health Economics, Elsevier, vol. 22(4), pages 617-635, July.
  8. 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.
  9. Glied, Sherry, 2000. "Managed care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753 Elsevier.
  10. 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, vol. 21(3), pages 423-449, May.
  11. 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.
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Citations

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Cited by:
  1. 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, vol. 14(2), pages 143-160, June.
  2. 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-F-916, CIRJE, Faculty of Economics, University of Tokyo.
  3. Michael Leung, 2010. "Primary care delivery, risk pooling and economic efficiency," The European Journal of Health Economics, Springer, vol. 11(2), pages 161-175, April.
  4. 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, issue 365, October.
  5. David, Guy & Neuman, Mark D., 2011. "Physician division of labor and patient selection for outpatient procedures," Journal of Health Economics, Elsevier, vol. 30(2), pages 381-391, March.
  6. de Freitas, Maurício Assuero Lima & Stamford da Silva, Alexandre, 2013. "The influence of the healthcare system on optimal economic growth," Economic Modelling, Elsevier, vol. 35(C), pages 734-742.
  7. Allard, Marie & Jelovac, Izabela & Léger, Pierre Thomas, 2011. "Treatment and referral decisions under different physician payment mechanisms," Journal of Health Economics, Elsevier, vol. 30(5), pages 880-893.
  8. Kantarevic, Jasmin & Kralj, Boris, 2011. "Quality and Quantity in Primary Care Mixed Payment Models: Evidence from Family Health Organizations in Ontario," IZA Discussion Papers 5762, Institute for the Study of Labor (IZA).

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