IDEAS home Printed from https://ideas.repec.org/p/tiu/tiucen/fee69eb7-1661-4ec2-8aae-fd08c3f1ce8c.html
   My bibliography  Save this paper

Selective Contracting and Foreclosure in Health Care Markets

Author

Listed:
  • Bijlsma, M.
  • Boone, J.

    (Tilburg University, Center For Economic Research)

  • Zwart, Gijsbert

    (Tilburg University, Center For Economic Research)

Abstract

We analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains active in the market for the non-insured, we show that exclusion leads to anti-competitive effects on this non-insured market. As a consequence exclusion can raise industry profits, and then occurs in equilibrium. Under competitive insurance markets, the anticompetitive exclusive equilibrium survives. Uninsured consumers, however, are now not better off without exclusion. Competition among insurers raises prices in equilibria without exclusion, as a result of a horizontal analogue to the double marginalization effect. Instead, under competitive insurance markets exclusion is desirable as long as no provider is excluded by all insurers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bijlsma, M. & Boone, J. & Zwart, Gijsbert, 2009. "Selective Contracting and Foreclosure in Health Care Markets," Discussion Paper 2009-89, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:fee69eb7-1661-4ec2-8aae-fd08c3f1ce8c
    as

    Download full text from publisher

    File URL: https://pure.uvt.nl/ws/portalfiles/portal/1156376/2009-89.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Spector, 2011. "Exclusive contracts and demand foreclosure," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 619-638, December.
    2. Martin Gaynor & Ching-to Albert Ma, "undated". "Insurance, Vertical Restraints, and Competition," GSIA Working Papers 53, Carnegie Mellon University, Tepper School of Business.
    3. Scott, Anthony, 2000. "Economics of general practice," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 22, pages 1175-1200, Elsevier.
    4. Nathalie Fombaron & Carine Milcent, 2007. "The distortionary effect of health insurance on health demand," Working Papers halshs-00587713, HAL.
    5. Vita, Michael G., 2001. "Regulatory restrictions on selective contracting: an empirical analysis of "any-willing-provider" regulations," Journal of Health Economics, Elsevier, vol. 20(6), pages 955-966, November.
    6. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. "Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-763, Winter.
    7. Town, Robert & Vistnes, Gregory, 2001. "Hospital competition in HMO networks," Journal of Health Economics, Elsevier, vol. 20(5), pages 733-753, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bardey David & Bourgeon Jean-Marc, 2011. "Health Care Network Formation and Policyholders' Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-20, January.
    2. Boone, J. & Schottmuller, C., 2015. "Health Provider Networks, Quality and Costs," Discussion Paper 2015-005, Tilburg University, Center for Economic Research.
    3. Moes, Floortje & Houwaart, Eddy & Delnoij, Diana & Horstman, Klasien, 2020. "Questions regarding ‘epistemic injustice’ in knowledge-intensive policymaking: Two examples from Dutch health insurance policy," Social Science & Medicine, Elsevier, vol. 245(C).
    4. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    5. David Bardey & Giancarlo Buitrago, 2015. "Integración vertical en el sector de la salud colombiano," Documentos CEDE 14069, Universidad de los Andes, Facultad de Economía, CEDE.
    6. Juliana Morad Acero, 2021. "Los medicamentos y las tutelas en salud," Documentos de trabajo 20154, Escuela de Gobierno - Universidad de los Andes.
    7. Rudy Douven & Rein Halbersma & Katalin Katona & Victoria Shestalova, 2014. "Vertical Integration and Exclusive Behavior of Insurers and Hospitals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(2), pages 344-368, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    2. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    3. Sorek, Gilad, 2016. "Competition and consumer choice in option demand markets," Economics Letters, Elsevier, vol. 146(C), pages 13-16.
    4. Christopher Conlon & Julie Holland Mortimer, 2021. "Empirical properties of diversion ratios," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 693-726, December.
    5. Berden, Carolien & Croes, R. & Kemp, R. & Mikkers, Misja & van der Noll, Rob & Shestalova, V. & Svitak, Jan, 2019. "Hospital Competition in the Netherlands : An Empirical Investigation," Discussion Paper 2019-008, Tilburg University, Tilburg Law and Economic Center.
    6. Anne‐Fleur Roos & Ramsis R. Croes & Victoria Shestalova & Marco Varkevisser & Frederik T. Schut, 2019. "Price effects of a hospital merger: Heterogeneity across health insurers, hospital products, and hospital locations," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1130-1145, September.
    7. Joseph Farrell & David Balan & Keith Brand & Brett Wendling, 2011. "Economics at the FTC: Hospital Mergers, Authorized Generic Drugs, and Consumer Credit Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(4), pages 271-296, December.
    8. Suhui Li & Avi Dor, 2013. "How Do Hospitals Respond to Market Entry? Evidence from A Deregulated Market for Cardiac Revascularization," NBER Working Papers 18926, National Bureau of Economic Research, Inc.
    9. R. Halbersma & M. Mikkers & E. Motchenkova & I. Seinen, 2011. "Market structure and hospital–insurer bargaining in the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(6), pages 589-603, December.
    10. ., 2012. "Models of Negotiation and Bargaining in Health Care," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 21, Edward Elgar Publishing.
    11. Zack Cooper & Stuart V Craig & Martin Gaynor & John Van Reenen, 2019. "The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 51-107.
    12. Kate Ho & Robin S. Lee, 2019. "Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets," American Economic Review, American Economic Association, vol. 109(2), pages 473-522, February.
    13. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.
    14. Julie Carlson & Leemore Dafny & Beth Freeborn & Pauline Ippolito & Brett Wendling, 2013. "Economics at the FTC: Physician Acquisitions, Standard Essential Patents, and Accuracy of Credit Reporting," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(4), pages 303-326, December.
    15. Katherine Ho, 2009. "Insurer-Provider Networks in the Medical Care Market," American Economic Review, American Economic Association, vol. 99(1), pages 393-430, March.
    16. Michael Salinger & Keith Anderson & Christopher Garmon & David Schmidt & John Yun, 2006. "Economics at the FTC: Data Intensive Mergers and Policy R&D," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(4), pages 327-348, December.
    17. Stuart V. Craig & Matthew Grennan & Ashley Swanson, 2021. "Mergers and marginal costs: New evidence on hospital buyer power," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 151-178, March.
    18. Gautam Gowrisankaran & Aviv Nevo & Robert Town, 2015. "Mergers When Prices Are Negotiated: Evidence from the Hospital Industry," American Economic Review, American Economic Association, vol. 105(1), pages 172-203, January.
    19. Thomas Koch & Shawn W. Ulrick, 2021. "Price Effects Of A Merger: Evidence From A Physicians' Market," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 790-802, April.
    20. Capps, Cory & Dranove, David & Lindrooth, Richard C., 2010. "Hospital closure and economic efficiency," Journal of Health Economics, Elsevier, vol. 29(1), pages 87-109, January.

    More about this item

    Keywords

    health insurance; uninsured; selective contracting; exclusion; foreclosure; anti-competitive effects;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiucen:fee69eb7-1661-4ec2-8aae-fd08c3f1ce8c. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richard Broekman (email available below). General contact details of provider: http://center.uvt.nl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.