EuHEA seminar, Elias Carroni (Alma Mater Studiorum - Università di Bologna)

Elias Carroni

Abstract

The economic incentives of physicians when recommending medical treatments constitutes an important agency problem in health care. In this paper, a patient experiences symptoms of an illness and visits a physician, who recommends the treatment or not based on the results of a personalized (combination of) test(s), which can deliver a signal of health or of illness that changes the beliefs of the patient. The test is chosen by thephysician, whose payoff depends on the payment for each treatment performed, on the treatment cost and on the testing cost. We show that at equilibrium there are three categories of patients. Patients with extreme preferences towards the treatment do not receive a test. Among them, those who are reluctant against a treatment refraining from treatment, whereas those inclined take the treatment. Differently, patients with intermediate preferences receive a test and take unnecessary treatment with positive probability. We discuss some policy interventions aiming at improving the health loss and the welfare loss compared to first best of no uncertainty.