Balance Billing as an Adherence-to-Treatment Signalling Device

Abstract

In some countries, including France, patients can choose between consulting a physician working in the regulated sector where, in general, fees are fully covered by health insurance (whether public, private or mixed), or a physician working in the unregulated sector, where a balance billing scheme operates. In the latter, fees might not be fully covered by health insurance, and patients must make out-of-pocket payments. The paper analyses the signalling properties of this mechanism in a context where patients are heterogenous with respect to their propensity to adhere to the prescribed treatment. The model reveals that a small extra fee allows to obtain a separating equilibrium in which only patients with a high propensity to adhere to the treatment will opt for the unregulated sector and benefit of a higher care effort on behalf of their physician. We also analyse the other equilibria of the game and comment on their welfare properties.