Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment

Steffen Huck, Gabriele Lünser, Florian Spitzer and Jean-Robert Tyran

Discussion Papers, Research Unit: Economics of Change from WZB Berlin Social Science Center

Abstract: 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.

Keywords: Credence good; Physician; Overtreatment; Competition; Insurance (search for similar items in EconPapers)
JEL-codes: C91 I11 I13 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-ger, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Related works:
Journal Article: Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment (2016)
Working Paper: Medical Insurance and Free Choice of Physician Shape Patient Overtreatment. A Laboratory Experiment (2014)
Working Paper: Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment (2014)
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