Incentive Compatible Reimbursement Schemes for Physicians
Forthcoming in Journal of Institutional and Theoretical Economics
21 Pages Posted: 20 Jan 2010 Last revised: 14 Nov 2013
Date Written: July 2013
We consider physicians with fixed capacity levels. If a physician's capacity exceeds demand, she may have an incentive to overtreat, i.e., she may provide unnecessary treatments to use up idle capacity. By contrast, with excess demand she may undertreat, i.e., she may not provide necessary treatments since other activities are financially more attractive. We first show that simple fee-for-service reimbursement schemes do not provide proper incentives. If insurers use, however, fee-for-service schemes with quantity restrictions, they solve the fraudulent physician problem.
Keywords: credence goods, expert services, incentives, medical doctors, demand inducement, insurance
JEL Classification: D82, I11
Suggested Citation: Suggested Citation