Cost Incentives for Doctors

A Double-Edged Sword

C. Schottmuller

Research output: Working paperDiscussion paperOther research output

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Abstract

Incentivicing doctors to take the costs of treatment into account in their prescription decision could lead to lower health care expenditures and higher welfare. This paper shows that also the opposite effects can result. The reason is a misalignment of doctor and patient incentives: Because of health insurance, the patient does not take the costs of treatment fully into account. This misalignment hampers communication between patient and doctor, e.g. the patient may overstate the intensity of symptoms. It is shown that cost incentives for doctors increase welfare if (i) the doctor's examination technology is sufficiently good or (ii) (marginal) costs of treatment are high enough. Optimal health care systems should implement different degrees of cost incentives depending on type of disease and/or doctor.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Volume2011-105
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-105

Fingerprint

Doctors
Incentives
Costs
Misalignment
Marginal cost
Communication
Health care expenditures
Prescription
Health insurance
Health care system

Keywords

  • cheap talk
  • communication
  • health insurance
  • market design

Cite this

Schottmuller, C. (2011). Cost Incentives for Doctors: A Double-Edged Sword. (CentER Discussion Paper; Vol. 2011-105). Tilburg: Economics.
Schottmuller, C. / Cost Incentives for Doctors : A Double-Edged Sword. Tilburg : Economics, 2011. (CentER Discussion Paper).
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Schottmuller, C 2011 'Cost Incentives for Doctors: A Double-Edged Sword' CentER Discussion Paper, vol. 2011-105, Economics, Tilburg.

Cost Incentives for Doctors : A Double-Edged Sword. / Schottmuller, C.

Tilburg : Economics, 2011. (CentER Discussion Paper; Vol. 2011-105).

Research output: Working paperDiscussion paperOther research output

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Schottmuller C. Cost Incentives for Doctors: A Double-Edged Sword. Tilburg: Economics. 2011. (CentER Discussion Paper).