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Provider competition and over-utilization in health care

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  • Boone, Jan
  • Douven, Rudy

Abstract

This paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We argue that each of these can be optimal depending on the contracting environment of a speciality. In particular, CfM is optimal in a clinical situation where the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether patients react to decentralized information on quality differences between providers and whether payer's and patients' preferences are aligned.

Suggested Citation

  • Boone, Jan & Douven, Rudy, 2014. "Provider competition and over-utilization in health care," CEPR Discussion Papers 10177, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10177
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    Cited by:

    1. Boone, Jan, 2019. "Health provider networks with private contracts: Is there under-treatment in narrow networks?," Journal of Health Economics, Elsevier, vol. 67(C).
    2. Albrecht, Martin, 2018. "Potenziale für mehr Wettbewerb im Gesundheitswesen: Expertise," Working Papers 05/2018, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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