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Competition in health care markets: treatment volume and quality

Jan Boone

No 12853, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: competition in health care markets; insurer competition; provider competition; treatment quality; treatment volume (search for similar items in EconPapers)
JEL-codes: I11 I13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta, nep-hea and nep-ias
Date: 2018-04
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