SHOULD PHYSICIANS BE PERMITTED TO BALANCE BILL PATIENTS

This paper studies the efficiency effects of physician fees when the i nsurer (possibly the government) pays a fee for each procedure, and th e doctor may supplement the fee by an extra charge to the patient, a p ractice known as 'balance billing.' Monopolistically competitive physi cians can discriminate among patients on the basis of both price and q uality. Equilibria with and without balance billing are compared. The paper analyzes and recommends a new fee policy, a form of payer 'fee d iscrimination.'