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Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment

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Listed author(s):
  • Huck, Steffen
  • Lünser, Gabriele
  • Spitzer, Florian
  • Tyran, Jean-Robert

Abstract

In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients, we study the effects of medical insurance and competition in the guise of free choice of physician, including observability of physicians’ market shares. Medical treatment is an example of a credence good: only the physician knows the appropriate treatment, the patient does not. Even after a consultation, the patient is not sure whether he received the right treatment or whether he was perhaps 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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268116301184
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 131 (2016)
Issue (Month): PB ()
Pages: 78-105

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Handle: RePEc:eee:jeborg:v:131:y:2016:i:pb:p:78-105
DOI: 10.1016/j.jebo.2016.06.009
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

Keywords: Credence good; Physician; Overtreatment; Competition; Insurance;

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Find related papers by 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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Cited by:

  1. Mimra, Wanda & Rasch, Alexander & Waibel, Christian, 2016. "Second opinions in markets for expert services: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 106-125.
  2. Brosig-Koch, Jeannette & Hehenkamp, Burkhard & Kokot, Johanna, 2016. "The effects of competition on medical service provision," Ruhr Economic Papers 647, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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