Competition in Health Care Markets: Treatment Volume and Quality

43 Pages Posted: 16 Apr 2018

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

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Date Written: April 2018

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

JEL Classification: I11, I13

Suggested Citation

Boone, Jan, Competition in Health Care Markets: Treatment Volume and Quality (April 2018). CEPR Discussion Paper No. DP12853, Available at SSRN: https://ssrn.com/abstract=3163485

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

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Tilburg, 5000 LE
Netherlands

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