The Existence and Nature of Physician Agency: Evidence of Stinting from the British National Health Service

The ability of physicians to make take‐it‐or‐leave‐it offers of treatment implies that even fully informed consumers of health care may receive treatments that they would not themselves choose. This paper examines both the extent and direction of this distortion away from patient choice—the physician agency effect—using a large patient‐level claims‐based data set for dental treatments under the British National Health Service. We find that an improvement in the outside opportunities of patients results in a small but significant increase in the level of service provided when dentists are remunerated on a fee‐for‐service basis. This is suggestive of stinting, wherein physician agency results in undertreatment relative to what patients would choose. We further find that the effect is increased when patients are fully insulated from the cost of their treatment.