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

See all articles by Winand Emons

Winand Emons

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

Abstract

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

Emons, Winand, Incentive Compatible Reimbursement Schemes for Physicians (July 2013). Forthcoming in Journal of Institutional and Theoretical Economics. Available at SSRN: https://ssrn.com/abstract=1538738 or http://dx.doi.org/10.2139/ssrn.1538738

Winand Emons (Contact Author)

University of Bern - Department of Economics ( email )

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HOME PAGE: http://staff.vwi.unibe.ch/emons

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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