Incentive Compatible Reimbursement Schemes for Physicians

20 Pages Posted: 8 Feb 2010

See all articles by Winand Emons

Winand Emons

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

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Date Written: January 2010

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, demand inducement, expert services, incentives, insurance, medical doctors

JEL Classification: D82, I11

Suggested Citation

Emons, Winand, Incentive Compatible Reimbursement Schemes for Physicians (January 2010). CEPR Discussion Paper No. DP7659, Available at SSRN: https://ssrn.com/abstract=1547579

Winand Emons (Contact Author)

University of Bern - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

London
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