TY - JOUR
T1 - Medical Insurance and Free Choice of Physician Shape Patient Overtreatment
T2 - A Laboratory Experiment
AU - Huck, Steffen
AU - Lünser, Gabriele
AU - Spitzer, Florian
AU - Tyran, Jean-Robert Karl
PY - 2016/11/1
Y1 - 2016/11/1
N2 - 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.
AB - 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.
U2 - 10.1016/j.jebo.2016.06.009
DO - 10.1016/j.jebo.2016.06.009
M3 - Journal article
SN - 0167-2681
VL - 131
SP - 78
EP - 105
JO - Journal of Economic Behavior & Organization
JF - Journal of Economic Behavior & Organization
IS - Part B
ER -