Skepticism and credulity in the
market for health care services
Eric Schmidbauer
with Dmitry Lubensky
Kelley School of Business
Indiana University
October 27, 2012
Evidence of both over- and undertreatment
•
“The most important contributor to the
high cost of US healthcare….is
overutilization” 1
•
“Patients with higher out-of-pocket costs
were more likely to forgo medications
when their trust in a physician was
low. Among low-trust patients, but not
among high-trust patients, low income
was associated with underuse of
medication.”2
•
There are almost 3 times as many MRIs
per capita in the U.S. as the OECD average
•
US patients receive considerably more
coronary artery bypass grafts,
angioplasties, and stents than OECD
patients
•
“…the likelihood of reporting unmet
health care needs and delayed care was
negatively related to patients’ trust in a
physician in most patient groups.”2
•
US patients utilize many more “new
drugs”—those on the market 5 years or
fewer—than patients in other countries
•
“patients’ trust in a physician [is]
positively related to patients’ reports of
adherence to physician advice about
smoking, alcohol use, seat belt use, diet,
exercise, stress, and safe sex practices.”2
1Emanuel, Ezekiel
J. and Victor R. Fuchs. June 2008. The Perfect Storm of Overutilization. Journal of the American Medical Association.
299(23): 2789-91.
2“Chapter 10: The Health Care Outcomes of Trust: A Review of Empirical Evidence” in Researching Trust and Health. Brownlie, Greene,
Howson. 2008.
What is happening here?
• Information transmission problem
• Expert biased towards overtreatment
– Fear of malpractice claims (“defensive medicine”)
– Fee for service
• Rational patients should not blindly follow a
doctor’s advice
– The level of trust ought to be endogenous
Existing models
• Framework of Crawford and Sobel
(Econometrica, 1982)
• Pitchik and Schotter (AER, 1987)
• De Jaegher and Jegers (Health Economics,
2001)
Overview of results
• Both over- and under-treatment are
increasing in bias
• Total surplus is decreasing in bias
• More information is transmitted than in
Crawford & Sobel
• Total surplus in our model is higher than in
Crawford & Sobel
The model
• The doctor observes the patient's true health
state θ∼U[0,1] and makes a recommendation
for treatment m∈M=[0,1]
• UD(θ,b,a)= -(θ+b-a)² and UP(θ,a)= -(θ-a)²,
where b is the bias of the doctor
• The patient's action set is A={0,m}
Equilibrium
• Suppose the receiver rejects
all messages below x and
accepts otherwise.
• Then the sender induces
action:
• min{θ+b,1} for high
health states θ
• x for intermediate health
states θ
• 0 for low health states θ
• Equilibrium actions as a
function of θ
• Receiver’s preferred
action as a function of θ
• Bias 𝑏 = 0.1
Health state θ~𝑈[0,1]
Other equilibria
• Non-threshold
strategies
• Higher thresholds
Determination of threshold x
• For a given b,
x is determined by
satisfying
𝑥
𝑥
𝐸 θ| − 𝑏 ≤ θ < 𝑥 − 𝑏 ≥
2
2
• Claim: undertreatment
is increasing in bias
𝑥
−𝑏
2
𝑥−𝑏
Additional findings
Claim: overtreatment is increasing in bias
Claim: total surplus is decreasing in bias
Action (a)
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
State (theta)
Comparison to Crawford and Sobel
Action (a)
1.0
0.9
Claim: more information is
transmitted
0.8
0.7
0.6
0.5
0.4
0.3
0.2
Claim: total surplus is
higher
0.1
0.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
State (theta)
Summary & Implications
• The model is testable
– Data with variation in doctor bias
• Reducing bias will increase total surplus
• Requiring a doctor’s prescription improves
information transmission and total surplus