Rent-Seeking in Public Fee-for-Service Health Care

Do doctors conduct illegal rent-seeking behaviour? Canada is thought to have one of the best public health care systems in the world. Canadian physicians are primarily paid through fee-for-service scheme, which incentivizes quick patient visits and providing more intensive or complex treatments. How does this incentive scheme impact the overall cost of health care to the Canadian taxpayer? Mis-aligned incentives and market inefficiencies have been studied in-depth in the context of privatized American health care, but to my knowledge no published economics research has studied this in context of publicly provided Canadian health care. Using rich patient-level data, I exploit quasi-exogenous changes to the way the government requires doctors to report their treatments in order to discern the gross economic loss to the Canadian taxpayer from physician rent-seeking behaviour. The outcome of this research potentially has broader implications for designing efficient markets for public health care provision.