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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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    Cited by:

    1. Pierre-Thomas Léger & Erin C. 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. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. Sarah M. Hofmann & Andrea M. Muehlenweg, 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.
    9. 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/Revue canadienne d'économique, John Wiley & Sons, vol. 46(1), pages 208-238, February.
    10. 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.
    11. Sang M. Lee & DonHee Lee, 2022. "Effects of healthcare quality management activities and sociotechnical systems on internal customer experience and organizational performance," Service Business, Springer;Pan-Pacific Business Association, vol. 16(1), pages 1-28, March.
    12. 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.
    13. Rosella LEVAGGI & Lise ROCHAIX, 2007. "Exit, Choice Or Loyalty: Patient Driven Competition In Primary Care," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(4), pages 501-535, December.

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    More about this item

    Keywords

    General Care; Specialty Care; Hospitalization; Insurance; HMOs; Imperfect Information.;
    All these keywords.

    JEL classification:

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

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