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Information Asymmetry, Insurance, and the Decision to Hospitalize

Author

Listed:
  • Åke Blomqvist

    () (Department of Economics, University of Western Ontario)

  • Pierre Thomas Léger

    () (IEA, HEC Montréal)

Abstract

In a theoretical model, 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 present two broad models, the traditional fee-for-service payment scheme (with an without information asymmetry) and a managed care setup where physicians are paid via capitation. We find that a second-best optimal managed care plan may dominate (under certain conditions) a second-best optimal conventional plan with cost control through demand-side cost sharing.

Suggested Citation

  • Åke Blomqvist & Pierre Thomas Léger, 2001. "Information Asymmetry, Insurance, and the Decision to Hospitalize," Cahiers de recherche 01-03, HEC Montréal, Institut d'économie appliquée.
  • Handle: RePEc:iea:carech:0103
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    References listed on IDEAS

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    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-298, April.
    11. 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.
    12. 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.
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    Citations

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    Cited by:

    1. Pierre Thomas Léger & Erin Strumpf, 2010. "Système de paiement des médecins : bref de politique," CIRANO Project Reports 2010rp-12, CIRANO.
    2. Boris Kralj & Jasmin Kantarevic, 2013. "Quality and quantity in primary care mixed-payment models: evidence from family health organizations in Ontario," Canadian Journal of Economics, Canadian Economics Association, vol. 46(1), pages 208-238, February.
    3. Sarah M. Hofmann & Andrea M. Mühlenweg, 2016. "Gatekeeping in German Primary Health Care – Impacts on Coordination of Care, Quality Indicators and Ambulatory Costs," CINCH Working Paper Series 1605, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Sep 2016.
    4. 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.
    5. 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.
    6. 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.
    7. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2014. "Payment mechanism and GP self-selection: capitation versus fee for service," International Journal of Health Economics and Management, Springer, vol. 14(2), pages 143-160, June.
    8. 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.
    9. Michael Leung, 2010. "Primary care delivery, risk pooling and economic efficiency," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(2), pages 161-175, April.
    10. 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.

    More about this item

    Keywords

    General Care; Specialty Care; Hospitalization; Insurance; HMOs; Imperfect Information.;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

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