Medical Insurance and Free Choice of Physician Shape Patient Overtreatment: A Laboratory Experiment

46 Pages Posted: 11 Oct 2014

See all articles by Steffen Huck

Steffen Huck

Wissenschaftszentrum Berlin für Sozialforschung (WZB)

Gabriele K. Lünser

University College London - Centre for Economic Learning and Social Evolution (ELSE)

Florian Spitzer

University of Vienna - Vienna Center for Experimental Economics; Vienna University of Economics and Business

Jean-Robert Tyran

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

Date Written: October 10, 2014

Abstract

In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients in a stylized way, we study the effects of medical insurance and competition in the guise of free choice of physician. Medical treatment is an example of a credence good: only the physician (but not the patient) knows the appropriate treatment, and even after consulting, the patient is not sure whether he got proper treatment or got an unnecessary treatment, i.e. was 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.

Keywords: Credence good, Patient, Physician, Overtreatment, Competition, Insurance, Moral hazard

JEL Classification: C91, I11, I13

Suggested Citation

Huck, Steffen and Lünser, Gabriele K. and Spitzer, Florian and Tyran, Jean-Robert, Medical Insurance and Free Choice of Physician Shape Patient Overtreatment: A Laboratory Experiment (October 10, 2014). Available at SSRN: https://ssrn.com/abstract=2508158 or http://dx.doi.org/10.2139/ssrn.2508158

Steffen Huck

Wissenschaftszentrum Berlin für Sozialforschung (WZB) ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

Gabriele K. Lünser

University College London - Centre for Economic Learning and Social Evolution (ELSE) ( email )

Gower Street
London WC1E 6BT
United Kingdom

Florian Spitzer

University of Vienna - Vienna Center for Experimental Economics ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Jean-Robert Tyran (Contact Author)

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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