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Competition in health care markets: treatment volume and quality

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  • Boone, Jan

Abstract

This paper introduces a workhorse model to analyze the effects of provider and insurer competition in health care markets. The two contracting imperfections we focus on are the following: (i) whether or not a patient should be treated and (ii) treatment quality are both not contractible. We derive conditions under which the market can implement first best quality and volume with the optimal competition intensities. First best competition intensity is strictly positive in both markets. If there is under-investment in quality, provider competition should be increased. Increasing insurer competition tends to increase treatment volume. If the planner cannot make the provider market competitive enough, it is optimal to increase insurer competition beyond its first best level thereby creating over-treatment.

Suggested Citation

  • Boone, Jan, 2018. "Competition in health care markets: treatment volume and quality," CEPR Discussion Papers 12853, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12853
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    More about this item

    Keywords

    Competition in health care markets; Insurer competition; Provider competition; Treatment volume; Treatment quality;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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