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Imposed Health Insurance In Monopolistic Markets: A Theoretical Analysis

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  • H. E. “TED” FRECH
  • PAUL B. GINSBURG

Abstract

The impact of public health insurance on price and output of medical care is analyzed within the context of monopolistic markets for health services. An important result, which is not obtained in competitive markets, is that indemnity benefits cause smaller price increases than service benefits, both directly and indirectly through the effect of benefit structure on the production of information. Various types of price regulation are considered, including limitation to “usual, customary, and prevailing” levels, a frequently used technique. With a simple dynamic model this type of regulation is shown to cause chronic price inflation.

Suggested Citation

  • H. E. “Ted” Frech & Paul B. Ginsburg, 1975. "Imposed Health Insurance In Monopolistic Markets: A Theoretical Analysis," Economic Inquiry, Western Economic Association International, vol. 13(1), pages 55-70, March.
    • Handle: RePEc:bla:ecinqu:v:13:y:1975:i:1:p:55-70
    DOI: 10.1111/j.1465-7295.1975.tb01103.x
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    References listed on IDEAS

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    1. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-280, Part I, M.
    2. Charles W. Baird, 1970. "A Proposal for Financing the Purchase of Health Services," Journal of Human Resources, University of Wisconsin Press, vol. 5(1), pages 89-105.
    3. Lawrence J. White, 1972. "Quality Variation When Prices Are Regulated," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 425-436, Autumn.
    4. Rosett, Richard N & Huang, Lien-fu, 1973. "The Effect of Health Insurance on the Demand for Medical Care," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 281-305, Part I, M.
    5. Feldstein, Martin S, 1971. "Hospital Cost Inflation: A Study of Nonprofit Price Dynamics," American Economic Review, American Economic Association, vol. 61(5), pages 853-872, December.
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    Cited by:

    1. M. Martin Boyer & Jörg Schiller, 2003. "Merging Automobile Insurance Regulatory Bodies: The Case of Atlantic Canada," CIRANO Working Papers 2003s-70, CIRANO.
    2. H. E. Frech & Michael P. Smith, 2015. "Anatomy of a Slow-Motion Health Insurance Death Spiral," North American Actuarial Journal, Taylor & Francis Journals, vol. 19(1), pages 60-72, January.
    3. Nell, Martin & Richter, Andreas & Schiller, Jörg, 2009. "When prices hardly matter: Incomplete insurance contracts and markets for repair goods," European Economic Review, Elsevier, vol. 53(3), pages 343-354, April.
    4. Dionne, Georges, 1980. "Analyse des effets de l’assurance et de la relation de confiance consommateur-producteur sur les possibilités d’abus des chirurgiens," L'Actualité Economique, Société Canadienne de Science Economique, vol. 56(2), pages 211-238, avril-jui.
    5. Carl A. Johnston & Interdisciplinary Center for Economic Science, 2006. "Agent-based Investigation of Price Inflation In Health Insurance," Computing in Economics and Finance 2006 155, Society for Computational Economics.
    6. Nell, Martin, 2001. "Managed Claims: Zur Notwendigkeit einer vertikalen Integration von Versicherungs- und Reparaturleistungen," Working Papers on Risk and Insurance 2, University of Hamburg, Institute for Risk and Insurance.
    7. Mark A. Satterthwaite, 1977. "The Effect of Increased Supply on Equilibrium Price : A Theory for the Strange Case of Physicians' Services," Discussion Papers 294, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Louis De Alessi, 1989. "The Effect of Institutions on the Choices of Consumers and Providers of Health Care," Journal of Theoretical Politics, , vol. 1(4), pages 427-458, October.
    9. Boyer, M. Martin & Schiller, Jörg, 2003. "Merging automobile regulatory bodies: The case of Atlantic Canada," Working Papers on Risk and Insurance 11, University of Hamburg, Institute for Risk and Insurance.

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