Working Paper: CEPR ID: DP7659
Authors: Winand Emons
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 Codes: D82; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| type of reimbursement scheme (H55) | physician behavior (I11) |
| simple fee-for-service schemes (J33) | improper incentives for physicians (I11) |
| improper incentives for physicians (I11) | overtreatment (I12) |
| improper incentives for physicians (I11) | undertreatment (I12) |
| quantity restrictions in fee-for-service schemes (D45) | likelihood of overtreatment (I12) |
| quota matches fraction of patients needing treatment (C32) | overtreatment (I12) |