Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Economics

Supervisor

Dr. Al Slivinski

Abstract

This thesis consists of three chapters on insurer and provider interactions. Despite widespread reports of defensive medicine in surveys of physicians, empirical investigations have produced conflicting evidence that defensive medicine is practiced on a significant scale. Findings imply that the relationships between malpractice pressure and health care spending and quality are non-monotonic. These predictions provide an explanation for the apparent conflicts and inconsistencies in the existing empirical literature, as well as policy guidance for future empirical investigations in separating observations and populations in different equilibrium types.

The next chapter expands the model by making physicians mobile, and includes a location decision as a new margin of defensive behaviour. It constructs a theoretical model where insurers compete to provide consumers with health insurance while facing mobile physicians. Analytical and numerical results show that changes in malpractice pressure unique to one jurisdiction do influence health care spending and quality in other jurisdictions. This introduces the possibility of omitted variable bias in estimates of the effects of changes in malpractice pressure, and drives a wedge between the direct and aggregate effects.

The final chapter investigates the responses of payers and providers to an innovation in provider compensation: competitive bidding for patients. It constructs a multistage provider reimbursement system wherein unselected patients are allocated using competitive bidding, allowing for the analysis of the selection-efficiency tradeoff. The study finds that a mixed system of competitive bidding and capitation dominates a pure bidding system, and sufficient conditions for dominance of a pure capitation system.

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