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

Author(s)
Steffen Huck, Gabriele Lünser, Florian Spitzer, Jean-Robert Tyran
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.

Organisation(s)
Department of Economics, Vienna Center for Experimental Economics
External organisation(s)
Wissenschaftszentrum Berlin für Sozialforschung (WZB), Center for Economic Learning and Social Evolution (ELSE)
Journal
Journal of Economic Behavior & Organization
Volume
131
Pages
78-105
No. of pages
28
ISSN
0167-2681
DOI
https://doi.org/10.1016/j.jebo.2016.06.009
Publication date
2016
Peer reviewed
Yes
Austrian Fields of Science 2012
Behavioural economics, Industrial economics, Public finance
Keywords
Portal url
https://ucris.univie.ac.at/portal/en/publications/medical-insurance-and-free-choice-of-physician-shape-patient-overtreatment-a-laboratory-experiment(7f4ef8eb-83ee-4418-8635-d9c52e9afac8).html