Dispensing physicians, asymmetric information supplier-induced demand: evidence from the Swiss Health Survey

Abstract

In this paper, we apply a two-part model to estimate the effect of health literacy on the demand for physician visits under different institutional settings. Using a constructed measure of health information, we find evidence for supplier-induced demand in some parts of Switzerland. While the level of health information is uncorrelated with the likelihood of visiting a physician (contact decision), the conditional number of visits (frequency decision) depends on the individual’s information status and the regulation of physician drug dispensing. In cantons with a drug prescription scheme, we do not find a significant difference in the number of visits between well-informed individuals and people with relatively little health literacy. In contrast, the existence of self-dispensing general practitioner and specialists is associated with a gap in demand that is strongly related to health literacy: Compared to cantons with prescription schemes, uninformed patients exhibit a higher number of outpatient visits in the cantons that (partly) allow the dispensation of drugs by physicians. However, patients with a high level of health information seem to be rather unaffected by physician drug dispensing. As a consequence, we observe an information-related gap in the number of outpatient contacts that only prevails in areas where doctors are entitled to sell drugs themselves. These findings suggest that self-dispensing doctors succeed in inducing demand that affects the number of physician-patient contacts. Health literacy, on the other hand, tends to counter these incentives.

Appendix

Table 7 Predicted number of visits from the two model parts (three information categories)

Table 8 Predicted number of visits from the two model parts (four information categories)

Table 9 Full estimation output from the two-part model

Table 10 Second stage with correction for selection

Table 11 Estimation output with fewer covariates

Table 12 Full estimation output without BS and BL

Fig. 2

Survey questions on health competence

Proofs of the model results in “theoretical background” section

The three partial derivatives (3), (4), and (5) can be derived by applying the implicit function theorem to (1) and (2). In a first step, we replace m in (1) by m(p), and by $m(\varphi )$, respectively, and using (2), we write s(y) instead of s to obtain the following three equations:

$$\begin{aligned} N_{m}(m(p),m(p)/s)+N_{n}(m(p),m(p)/s)/s+p/s+\varphi (B'(m(p))-V'(m(p)/s)/s)= & {} 0\\ N_{m}(m(\varphi ),m(\varphi )/s)+N_{n}(m(\varphi ),m(\varphi )/s)/s+p/s+\varphi (B'(m(\varphi ))-V'(m(\varphi )/s)/s)= & {} 0\\ -N_{n}(m,m/s(\varphi ))+p_{s}(s(\varphi ))s(\varphi )-p(s(\varphi ))+\varphi V'(m/s(\varphi ))= & {} 0 \end{aligned}$$

We now have to differentiate $\partial m/\partial p$, $\partial m/\partial \varphi$, and $\partial s/\partial \varphi$. Knowing that $N_{mn}=N_{nm}=0$, the three equations above can then be written as:

$$\begin{aligned} N_{mm}\frac{\partial m}{\partial p}+N_{nn}\frac{\partial m}{\partial p}/s^{2}+1/s+\varphi \left( B''\frac{\partial m}{\partial p}-V''\frac{\partial m}{\partial p}/s^{2}\right)= & {} 0\\ N_{mm}\frac{\partial m}{\partial \varphi }+N_{nn}\frac{\partial m}{\partial \varphi }/s^{2}+(B'-V'/s)+\varphi \left( B''\frac{\partial m}{\partial \varphi }-V''\frac{\partial m}{\partial \varphi }/s^{2}\right)= & {} 0\\ N_{nn}m\frac{\partial s}{\partial \varphi }/s^{2}+p_{ss}\frac{\partial s}{\partial \varphi }s+p_{s}\frac{\partial s}{\partial \varphi }-p_{s}\frac{\partial s}{\partial \varphi }+V'-\varphi V''m\frac{\partial s}{\partial \varphi }/s^{2}= & {} 0 \end{aligned}$$

Without loss of generality, we set $N_{nn}=0$ and rearrange the three terms to obtain (3), (4), and (5):

$$\begin{aligned} \frac{\partial m}{\partial p}= & {} \frac{s}{\varphi V''-(N_{mm}+\varphi B'')s^{2}}>0,\\ \frac{\partial m}{\partial \varphi }= & {} \frac{s(sB'-V')}{\varphi V''-(N_{mm}+\varphi B'')s^{2}}<0,\\ \frac{\partial s}{\partial \varphi }= & {} \frac{V's}{\varphi V''n-p_{ss}s^{2}}>0. \end{aligned}$$