Competition in Health Care Markets: Treatment Volume and Quality

CentER Discussion Paper Series No. 2018-013

41 Pages Posted: 26 Apr 2018

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Multiple version iconThere are 2 versions of this paper

Date Written: April 9, 2018

Abstract

This paper introduces a workhorse model to analyze the effects of provider and insurer competition in health care markets. The two contracting imperfections we focus on are the following: (i) whether or not a patient should be treated and (ii) treatment quality are both not contractible. We derive conditions under which the market can implement first best quality and volume with the optimal competition intensities. First best competition intensity is strictly positive in both markets. If there is under-investment in quality, provider competition should be increased. Increasing insurer competition tends to increase treatment volume. If the planner cannot make the provider market competitive enough, it is optimal to increase insurer competition beyond its first best level thereby creating over-treatment.

Keywords: competition in health care markets, insurer competition, provider competition

JEL Classification: I13, I11

Suggested Citation

Boone, Jan, Competition in Health Care Markets: Treatment Volume and Quality (April 9, 2018). CentER Discussion Paper Series No. 2018-013. Available at SSRN: https://ssrn.com/abstract=3159199 or http://dx.doi.org/10.2139/ssrn.3159199

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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