Essays on Behavioral Health Economics

Student thesis: Doctoral thesis

Abstract

In this work, we apply Behavioral Economic models and tools to the healthcare sector. First, the Health Plan market naturally generates a time gap between the acceptance of the Health Plan contract and the delivery of the contracted services. Therefore, in decisions regarding the signing of Health Plan contracts consumers are required to create forecasts to choose their supplier. It is natural to assume that consumers lack the knowledge and apparatus to accurately predict their future needs for medical services, as predictions of such ilk demand a considerable level of expertise and access to relevant information. Therefore, decisions in this market depend to a large extent on the beliefs hold by consumers. Moreover, consumers are very diverse in terms of such beliefs. In chapter 2 we study the Health Plan market in presence of consumers with biased beliefs on the likelihood of their future health status. That is, they over or underestimate the probability for them to contract a disease. We derive the implications of biased risk-of-disease estimations on the private and public healthcare systems. We find that when consumers hold biased beliefs, private providers can capitalize on such biases. Biased beliefs then become relevant as they could be a reason to offer Health Plan contracts that provide treatment quantities that differ from efficient levels. We explore the interaction that arises between private and public healthcare provision under such circumstances. For this we compute the contracts offered by a public provider and show that the presence of biased beliefs create room for the entrance of private providers, who take advantage of consumers biases to make strictly positive profits. We also analyze how the public provider reacts to the presence of private providers. Second, the choice of medical services providers (physicians, hospitals or Health Plans) involves a process of gathering information and a mechanism for estimating and evaluating the quality of said providers. These processes and mechanisms are also subject to behavioral biases. Specifically, in the third and fourth chapter of the present work we analyze the sources of information that consumers use to make judgments about the quality of physicians. We mainly focus in the manners in which the environment affects the physicians' choice of quality. Namely, in chapters 3 and 4 we study the ability choices and pricing strategies of physicians who operate in a market where consumers base their decisions on anecdotes. The consumers are aware of only some of the physicians in the market and estimate their abilities by taking a sample from the patients a given physician has previously treated. Consumers' decisions based on anecdotal evidence entail two hindrances: an over-reliance on small samples and the limited availability of information. In this setting, situations arise where physicians have incentives to choose low levels of ability even when it is costless. More information availability leads to more ability differentiation and a lower average ability level. The application of traditional economic models relying on rational, utility-maximizing agents with perfect information, has greatly contributed to the design and implementation of public policy in healthcare. Yet, we belief that the application of the tools from Behavioral Economics can be fruitful in further advancing the analysis of healthcare markets and institutions, particularly when one considers the peculiarities inherent to the sector. The present work is an attempt to contribute with some insights that could be helpful in developing a fuller unde
Date of Award6 Oct 2017
Original languageEnglish
SupervisorSusana Esteban Tavera (Director) & Jesus David Perez Castrillo (Director)

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