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

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.