Why Prevent When It Does Not Pay? Prevention When Health Services are Credence Goods

Abstract

This article identifies information asymmetries and the corresponding problem of overtreatment as a possible source of prevention and health disparities when patients differ with respect to their health risk. It analyzes preventive health behavior (primary prevention) and preventive health-care utilization (secondary prevention) in markets in which patients cannot determine whether they receive excessive secondary preventive treatment—that is, where health services are credence goods. The problem of overtreatment in such markets is considered as a possible pathway through which differences in health risk lead to disparities in primary and secondary prevention as well as the corresponding health outcomes. Patients with high health risks do not invest in primary prevention, because they anticipate to be provided with unnecessary secondary prevention. Patients with lower risks invest in primary but not in secondary prevention, resulting in health losses. Furthermore, when societal groups differ with respect to their exposure to overtreatment, and we consider socio-economic status as a possible reason, we observe disparities in primary and secondary prevention as well as the resulting health outcomes, including the ``social gradient.'' Several implications for empirical research are discussed.

Keywords: prevention; credence goods; health disparities; health risk; socio-economic status

JEL Classification: D82, I12, I14