Health Insurance and Imperfect Competition in

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1 Health Insurance and Imperfect Competition in the Health Care Market Rhema Vaithianathan August 17, 2004 Abstract Despite the moral-hazard problem in health insurance, competitive insurance markets are generally thought to maximise consumer welfare. We show that when health care markets are imperfectly competitive this is no longer true since individual consumers and insurers ignore the fact that generous insurance leads to health care price inflation. We argue that consumers are better off under a monopoly public insurer who imposes a higher coinsurance rate than the equilibrium. The role for the public insurer only disappears when the health care markets are perfectly competitive. However, under the optimal scheme, indivdual consumers taking health care prices as given, feel under-insured and demand supplemental insurance. If purchased, supplemental insurance leaves consumers collectively worse off. 1 Introduction Following the seminal contributions of Pauly (1968) and Zeckhauser (1970), health insurance is frequently modelled as taking the form of a premium and coinsurance rate, the latter being the fraction of the total cost of health care borne by the consumer. The optimal choice of coinsurance must balance the value of insurance to the consumer, against the moral hazard costs generated 1

2 by over-consumption of health care. The purpose of this paper is to incorporate another factor into this balancing act: the effect of coinsurance on health care prices. In the case of health insurance, ill health usually entails a shock which raises the marginal utility of wealth. Ex-ante a risk-averse consumer would therefore want to re-distribute wealth from healthy states, where the marginal utility of wealth is low, to illness-states. While the first-best insurance contract pays lump-sum benefits that are contingent on health, insurers are unable to observe health state. Since medical expenditure is both observable and correlated with illness, and in general the price of medical care and marginal utility of wealth are positively correlated, subsidising such expenditure through coinsurance provides an effective mechanism for redistributing wealth from the healthy states to the ill ones. Such expenditure subsidies, by increasing demand for health care results in higher health care prices if health care markets are imperfectly competitive. This in turn would change the optimal coinsurance rate. Therefore, the fact that insurance contracts and health care prices are determined jointly has important implications for welfare analysis of insurance (Feldstein (1976), Chiu (1997), Gaynor and Haas-Wilson (2000)). Health insurance, by increasing demand, will change the equilibrium price in an oligopolistic health-care market. In this paper, we consider a standard Zeckhauser-Pauly insurance contract, which comprises a premium paid in all states (P ), and a linear coinsurance rate (k). The insurance market is perfectly competitive, and (initially) we assume that both consumers and insurers take the price of health care (p) as given. The health care market is imperfectly competitive, with n 1 identical providers. Initially we assume that quantity (h) is determined by Cournot competition but in Section 5, we consider a special case of a perfectly price discriminating monopolist. The market-clearing conditions in the health insurance market, and Cournot equilibrium in the health care markets endogenously determines the long-run (P, k) and p as a function of n. 2

3 Feldstein (1976) was the first to speculate that the effect of price increases in health care could potentially destroy the value of insurance. However, Feldstein s was mainly an empirical paper and it was left to Chiu (1997) to demonstrate more formally how this possibility might occur. He shows that when the health care supply is (close to) completely inelastic, health insurance reduces consumer welfare. This is because under such conditions, Zeckhauser-Pauly type insurance is purely inflationary, and health care price inflation fully undermines the value of insurance. The Feldstein-Chiu result relies on sufficiently inelastic supply of health care and there is little empirical support for such extreme inelasticities in health care markets. We generate a similar result to Chiu s but with the more realistic assumption of imperfect competition. Given the large amount of consolidation amongst hospitals that has recently been observed (Gaynor and Haas-Wilson (1999), Cuellar and Gertler (2003)) as well as the reliance on patented therapeutic goods, imperfect competition in health care is a significant problem. The effect of such imperfect competition on the welfare of health insurance markets has been studied by Gaynor, Haas-Wilson and Vogt (2000). Their paper shows that while higher health care prices may appear at first-blush to be welfare improving by ameliorating insurance-induced over-consumption of health care, this is an erroneous conclusion. The competitive insurance contract in the presence of an imperfectly competitive health care market leaves consumers worse off than if health care markets were competitive. However, Gaynor et al do not question whether this competitive insurance contract maximises consumer welfare. While it is true that in general, competitive insurance markets maximise consumer welfare, the innovation in our paper is to explicitly model imperfectly competitive health care markets jointly with (competitive) insurance markets, and to show that this no longer holds when health care markets are imperfectly competitive. Ours is a useful exercise because it allows us to predict the long-run effects of decreased competition in the health care market on insurance coverage and welfare of consumers. It also allows us to show that consumers could be made 3

4 better off by public provision. The reason for the superiority of public insurance is that health-insurance imposes a negative pecuniary externality on consumers by causing health care price inflation. While competitive insurance markets ignore this externality; a public health insurer can internalises it. The challenge for such a scheme is to impose a higher coinsurance rate than that favoured by consumers, who mistakenly taking the health care price as fixed, feel under-insured. Consumers will wish to opt-out of the public scheme, or purchase supplementary insurance, but if allowed to do so, it makes them collectively worse off viz-a-vis the public scheme. The outline of the paper is as follows. Section 2 specifies the optimal coinsurance rate as a function of the health care price, and in Section 3 we determine the equilibrium health care price as a function of coinsurance rate. In Section 4, we show that under our assumptions, there is a unique competitive equilibrium of the health insurance market. We then find some welfare characteristics of this equilibrium. In Section 5, we reformulates the model by assuming that the health care provider is a monopolist who perfectly price discriminates by, for instance, offering discounts to consumers based on their insurance plan. Consumers and insurers anticipate this price discrimination. In this variant of the model, price discrimination causes consumers and insurers to internalise the negative externality effects of insurance on health care prices. We show that this may result in no-insurance being purchased. Interestingly, if the monopolist can be prohibited from price-discriminating, there always exists a price the monopolist is willing to commit to which is at once more profitable for the monopolist and better for the consumer. We speculate that this may well provide an additional explanation for the emergence of institutional arrangements (such as Preferred Provider Organisations) which require providers to commit to price prior to insurance contracts being traded. We show that securing such a fixed-price for health care lowers equilibrium coinsurance rates. 4

5 2 The Competitive Insurance Market Consumers are identical and face two possible states healthy and ill with a probability π of falling ill. Healthy consumers have a direct utility U (C) derived entirely from the consumption of a composite good C which is priced at 1. When ill, their utility function is U (C, h), and they obtain utility from consuming health-care h. Their demand for health care is h (p) which maximises U (C, h) subject to W C + p h where W is their wealth and p is the price of health-care. The indirect utility function for the two states is V (W ) and V (W, p) (where we have suppressed the price of the composite commodity in the indirect utility function). We assume that lim p 0 V (p, W ) = V (W ) and that the consumer is risk-averse. An insurance contract (P, k) is available which requires a premium P to be paid in both states, and a coinsurance rate of k [0, 1], being the fraction of medical bills paid by the consumer. The consumer s utility from (P, k) is given by Ψ = (1 π) V (W P ) + πv (pk, W P ) (1) We assume that the insurance market is perfectly competitive, therefore, the insurance contract is zero-profit and we can express P as a function of k: P (k) = π (1 k) q where q = h (pk) p. The optimal coinsurance rate is 1 [ ] k (p) = arg max (1 π) V (W P (k)) + πv (pk, W P (k)) k (2) 1 We expresse k as a function of p because later we will want to make p endogenous. However, note that both the seller and buyer of insurance takes p as given, and chooses k. 5

6 The objective of this paper is to consider the impact of coinsurance rates on demand for health care and the consequent price of health care. With a very general utility function, the premium has an additional income effect on h. This makes the analysis less tractable without gaining any additional insights. We therefore make the following assumption to aid our analysis. Assumption 1 There are no income effects on the demand for health care 2. The first order condition for (2) is 0 = ((1 π) α + πα) P (k) + dπv (pk, W ) (3) where α (α) is the marginal utility of wealth in the well (ill) states respectively. dπv (pk,w ) Using Roy s identity we may rewrite (3) as P (k) = π = πhpv 1 and ( q + (1 k) dq ) ( 0 = ((1 π) α + πα) π q + (1 k) dq ) παq (4) (1 k) dq = qα (5) where α = ( ) [(1 π) α + πα] α < 0 [(1 π) α + πα] Of course, α depends on k. We assume the following about α : Assumption 2 α k < See Gaynor, Haas-Wilson and Vogt (2000) for a class of utility functions which for which this assumption holds. 3 If this were not the case, the consumer gains no insurance from a coinsurance type contract. Therefore this assumption is neccesary to justify the use of Zeckhauser-Pauly type contracts (Jack and Sheiner, 1997 ). 6

7 Assumption 3 k (1, 0] α < α Assumption 4 lim k 0 α = α If Assumption 2 did not hold, a coinsurance type contract will not be able to reduce risk (in the sense of reducing the variance of marginal utilities). Therefore this assumption is necessary to justify the use of Zeckhauser-Pauly type contracts (Jack and Sheiner, 1997 ). Assumption 3 implies that α < 0 that is, the when coinsurance is more than 0, there is less than full insurance (in the sense of equalising marginal utilities of income in all states). It is clear from (5) that k (p) 0 unless dq dq = 0, and k (p) 1 unless = or p = 0. Ruling out these extreme conditions, implies that k (p) (0, 1). The following Lemma establishes that, under certain restrictions on the elasticity of demand, higher health care prices lead to lower equilibrium coinsurance rates. 4 Lemma 1 If (p) dp < 0. d2q dp < 0 and the demand for health care is inelastic ( ε < 1) then Proof. To find /dp we totally differentiate 5 2 [ ] Ψ dq k 2 + dp α + q dα dp (1 k) d2 q dp = 0 dp [ dq dp = dα dp α + q dp 2Ψ k2 ] d2q (1 k) dp The denominator is negative due to the second-order conditions for (5) to maximise Ψ. The numerator is positive by the condition of the lemma and the assumption that dα dp > 0. The assumption that the demand for health care is inelastic is consistent with the evidence. 4 This result is similar to Jack and Sheiner (1997) Proposition 2 where they show that optimal coinsurance rate increases with a subsidy to p provided demand for health care is price inelastic. 7

8 3 The Health Care Market We now turn to the health care market which is characterised by imperfect competition, and Cournot quantity-setting behavior. There are n [1, ) firms with identical marginal costs c. Each firm i, takes k and the quantity of other firms as given, and choose h i to maximise profits. We write the equilibrium quantity in the health care market as h e (k). We assume that since firms are identical each produces h e /n. Using the standard Cournot equilibrium condition, we can implicitly calculate h e (k) as y (h e (k), k) + he n y (h e (k), k) k = c (6) h where y (h; k) is the inverse demand of a consumer who faces a coinsurance rate of k. Given our assumption that there are no income effects on demand (1), coinsurance scales inverse demand. Therefore y (h; k) = ŷ (h) k (7) y (h; k) k = 1 h k ŷ (h) (8) where ŷ (h) is the inverse-demand function of an uninsured consumer. Using (7) and (8), rewrite (6) ŷ (h) k + h ŷ (h) = c n k ŷ (h) + h nŷ (h) = kc (9) Equation (9) shows that the effect of k is to scale the common marginal cost and its role is identical to a production subsidy. This makes it straight-forward to predict how changing k will effect the h e. Lemma 2 dh e / 0. 8

9 Proof. We can calculate ( dh ) by totally differentiating 9 as follows: ( ŷ (h) + nŷ (h) h + nŷ 1 ) (h) dh = c dh = n+1 n c ŷ (h) + h nŷ (h) (10) The second-order conditions for the firm s Cournot equilibrium implies that the denominator is negative therefore dh < 0. Lemma 2 implies that d (kp (k)) / > 0 where kp (k) is the out-of pocket price faced by the consumer. However, the model as it stands, has no implications for the sign of dp/. It does appear realistic to assume that when consumer s face lower coinsurance rates, health care prices rise. We therefore impose the following assumption. Assumption 5 dp (k) / < 0. 4 Long-run Equilibrium Having formulated the equilibrium coinsurance rate as a function of price k (p), and the equilibrium price of health care as a function of coinsurance p (k) we can proceed to define the competitive equilibrium of these two markets simultaneously, that is (p, k ) such that p (k ) = k (p ). Figure 1 presents a diagrammatic illustration of this equilibrium. The insurance market curve k (p) and the health care market equilibrium p (k) slope downwards. Where they intersect represents the equilibrium (p, k ). We write p 1 as the price of health care when consumers are uninsured. The dotted line is the hyperbola pk = p k and represents the locus of points which yields a constant demand for health care equal to h (k ). Lemma 3 of Gaynor, Haas-Wilson and Vogt (2000) shows that Assumption 1 implies d (pk (p)) /dp 0. In other words, when health care prices rise, k (p) falls but not by so much that more health care is consumed at higher prices. This implies that k (p) intersects the hyperbola kp = p k from below. On the 9

10 k 1 k(p) p(k) k * p * p 1 pk =p * k * Figure 1: 10

11 other hand, (2) implies that when c > 0, p (k) cuts the hyperbola from above. When c = 0, p (k) is equal to the hyperbola. This implies that there is a unique intersection of p (k) and k (p) and therefore equilibrium is unique. We now turn to a comparative static exercise of determining what happens to insurance and p when there is consolidation amongst health care providers. Equation (9) implies that for a given k, consolidation in the health care market causes h e to fall and therefore p (k) to shift right. The new equilibrium has lower coinsurance, higher health care price and lower health care consumption. A direct implication of Gaynor, Haas-Wilson and Vogt (2000) is that this also reduces consumer welfare. Increased market concentration therefore leads to higher prices and is more profitable than standard models predict. We now show that Chiu-Feldstein result can be shown to exists in the context of imperfectly competitive markets if marginal cost is sufficiently low that the pecuniary externality completely destroy the value of insurance. Proposition 1 There exists some c > 0, such that for c [0, c] the equilibrium (p, k ) leaves consumers collectively worse off than being uninsured and facing p 1. Proof. From 10 we know that when c = 0, p (k) is the hyperbola pk = p 1 > 0 (as long as n < ). The equilibrium therefore has k < 1. This means that the equilibrium is such that the consumer s consumption and his out-of pocket price of health care is identical to if he was uninsured. However, the premium is P (k ) = π (1 k ) p h ( p 1) > 0. Let S (p, k) be consumer surplus from insurance, then S (p, k ) = [ (1 π) V (W P (k )) + πv ( p 1, W P (k ) ) [ (1 π) V (W ) + πv ( p 1, W ) is < 0. As c increases, p (k) shifts to the right and becomes steeper than the hyerbola, the new equilibrium is therefore in an ε-neighbourhood of (p, k ). Moreover, S (p, k ) is continuous with (p, k ) which implies that S < 0 for c close to 0. 11

12 5 Public insurance scheme While proposition 10 suggests that when c < c, consumers would be better-off if they could commit to a long-term insurance contract, we show that this is always the case, even when c > c. We argue that this provides a novel justification for public insurance schemes. The public provider acting as an agent of the consumer, internalises the externality and chooses k = k to maximise [ ( Ψ = (1 π) V W P ) ( (k) + πv p (k) k, W P )] (k) subject to (11) P (k) = π (1 k) p (k) h (p (k) k) (12) Note that Ψ, unlike Ψ, does not take the price of health care as given. The coinsurance rate k therefore has to balance the costs of moral hazard and the pecuniary externality against the benefit to the consumer from risk-reduction. The first-order conditions for (11) is ( 1 k ) [ ( dh ) )] dp p ( k + k = qα (13) To see that k > k, note that (5) implies that q α = dh p (k ) < dh ) (p (k ) + k dp ( )) The problem for the public insurer is that since k p ( k < k, consumers ) taking p ( k as given will prefer to opt-out and or purchase supplementary ( )) insurance and thereby face a lower coinsurance rate of k p ( k. Were they permitted to do so, the resulting health care inflation would leave consumers worse-off than under the public scheme. Therefore, for a public scheme to be effective in solving the externality problem, it would need to prohibit opting-out or supplemental insurance. Would a monopolistic insurer rather than a public insurer also solve the externality problem? In Gaynor, Haas-Wilson and Vogt (2000), the monopolistic 12

13 insurer chooses k to maximise consumer welfare and then extracts all the consumer surplus in the form of higher premiums. In such models, no welfare loss arises from monopoly insurance because (k, P ) is effectively a two-part tariff 5. In our model, the conclusion no longer holds, since consumers take p as given but a monopolist would anticipate the effect of k on price. On the supply-side of the insurance market, the monopolist considers P (k) (defined in 12) to be the zero-profit premium. However, on the demand-side, consumers take p as given and demand for insurance is determined by maximising Ψ (defined in 1). The monopolist chooses k to maximise Ψ and sets P to extract all the consumer surplus. Therefore, the monopolist contract (k, P ) sets (1 π) V (W P ) + πv (pk, W P ) (1 π) V (W ) + πv (p, W ) = 0 (14) where the second term in this equation is the utility from self-insuring. However, we know that once all consumers purchase (P, k), they are worse-off since (1 π) V (W P ) + πv (pk, W P ) < (1 π) V (W P ) + πv (p (k) k, W P ) Therefore, although a monopolist insurer internalises the effect of k on p in terms of her profitability, she does not internalise its effect on consumer welfare, and therefore will sell a different contract to that of the public insurer. The insurer exploits consumer myopia, leaving them worse off than if they did not insure. 6 Price Discriminating Monopolist In the previous section we showed that if a public insurer acts as an agent of the consumer, and correctly anticipates the effect that insurance coverage will have on p, they can make consumers better-off. 5 In general, when a monopolist can charge a two-part tarrif, the first-best quantity is traded. 13

14 In this section, we suppose that consumers and insurers correctly predict the effect of their insurance decision on p. One reason is that health care provider is that the perfectly price discriminating monopolist. While such behaviour may appear far-fetched, discounts to uninsured consumers have long been observed in health-care markets. Kessel (1958) was one of the earliest to discuss this practice amongst doctors in the US, arguing that it was motivated, not by generosity, but by a desire to maximise profits. Feldstein (1970) documents evidence that uninsured patients pay around 67% of the price charged to insured patients when visiting the same doctor. More recently, in response to the large number of uninsured people in the US, hospitals and pharmaceutical companies are publishing discount schedules for the uninsured. Pfizer recently announced a 27 percent discount for low-income uninsured families 6. In this section, we assume perfect price discriminates, where the discount depends on k. Both consumers and insurers anticipate this and choose k to maximise Ψ when the price of health care (p m (k)) is given by the monopolist s reaction function (i.e. p m (k) satisfies (9) with n = 1). The first-order condition is identical to (13): (1 k) dq = qα hdpm α α k (15) Recall that we established that when c was sufficiently low, insurance left consumers worse off due to health care inflation. When consumers and insurers anticipate this, they will eschew insurance all-together. Proposition 1 With a price-discriminating monopolist, the equilibrium coin- Proof. and dpm p1 = k2and dq surance is k = 1 for some c [0, c]. When c = 0, p m = p1 k = h1 p1 k2where p 1 (h 1 ) is the monopoly price (quantity) received by an uninsured consumer. 6 Pfizer to Expand Discount Program Uninsured Will Have Access to Lower Drug Prices Washington Post Thursday, July 8, 2004; Page E03. 14

15 dψ d Ψ p1 = αh1 k p1 p1 p1 + α (1 k) h1 αh1 + αh k2 k k 2 k = h 1 p1 k ( ) (1 k) α + α k > 0 when k = 1, which implies a corner solution of k = 1. Moreover, since p m is continuous in c, and Ψ is continuous in c, theorem of the maximum implies that k is also continuous in c. Since dψ is strictly greater than 0 when c = 0, this implies that there exists a c > 0 such that for c [0, c], equilibrium k = 1. We now turn to the question of whether a price discriminating monopolist could actually benefit from a commitment not to price-discriminate. While in standard markets, perfect price-discrimination is both profitable and improves consumer welfare, this does not hold true for the current analysis since pricediscrimination has a spill-over effect on the insurance markets. If the provider can commit not to price discriminate, this makes both consumers and providers better off. the Proposition 2 Provider pre-commitment to a fixed price makes both consumers and providers better off. Proof. There are two cases to consider. First, suppose c [0, c] and price discrimination effects are so severe that consumers remain unisured. Then, a pre-commitment to p 1 is better for both the consumer and the provider. The consumer gains, since they obtain an insurance contract which has k < 1. Recall from 5, the consumer will always prefer to be insured when he takes the price of health care as given. The monpolist also gains since p 1 > c, therefore the higher demand from k < 1 increases the profit of monopolist, and insured consumers purchase more health care. Next, consider the case when c / [0, c] and despite the price-discrimination, insurance is traded with coinsurance of k < 1. If the ) monopolist pre-commits to p ( k m, then the monopolist is better off as long as 15

16 this price commitment elicits a lower coinsurance rate than k. That is, if the monopolist does not pre-commit to a price, his profits are ( ( k ) ) ( ( k) ) p m c h p m k ) However, by commiting to p ( k m, the monopolist increases his profits as long ( )) as k p ( k m < k. From 5, ) dψ ( k ( p=pm( k) = qα 1 k ) dq But 15 implies that Therefore, dψ( k) less than k. ( qα 1 k ) dq = α α dp m k < 0 (16) < 0 and the optimal k in the face of price commitment will be The emergence of Preferred Provider Organisations may be motivated in part as a response to the presence of price-discrimination in the health care provision market. In many cases, the only difference between PPO and traditional insurance schemes are pre-negotiated prices charged to consumers and insurers by preferred providers. 7 Conclusion This paper shows that pecuniary externalities from health insurance are always present when health-care markets are imperfectly competitive, and imply that competitive insurance markets do not maximise consumer welfare. Our result only disappear in the competitive limit.we argue that this provides a justification for the existence of a monopoly public insurance in the presence of imperfectly competitive health care markets. Since most health-care markets are highly regulated they also tend to be imperfectly competitive, and this result has wide applicability to many health care systems around the world. Indeed, it has implications for the recent moves 16

17 by the Medicare system to include pharmaceuticals in its insurance scheme and for the Australian policy of attempting to expand private health insurance. According to our model, these policies will lead to price inflation and more generous insurance coverage, but leave consumers worse off. A testable implication of this result is that health care systems that prohibit private supplementary insurance for a particular medical service would face lower prices than systems with a similar sized public insurer who permits supplementary insurance. A study by Pavenik (2002) provides empirical support for our prediction that change in coinsurance rates leads to increase in health care prices. She uses a unique policy experiment in Germany, when in 1989 the German government increased the out-of-pocket portion paid by patients for prescription drugs if the drug company charged above a reference price whereas previously patients paid a fixed out-of-pocket price regardless of the price. The effect of the reform was to introduce a kink in the demand curve for drugs at the reference price with demand being perfectly inelastic below and elastic above. The introduction of the regime for some drugs (such as antibiotics) was staged over a 5 years and the heterogeneity in timing is exploited to undertake a difference-indifference estimation procedure. Overall, the effect of the regime is to reduce price-per daily dose from between 10 and 26 percent. Suppliers who faced more competition from generics in the same active ingredient class, respond to reference pricing with a larger drop in price. Moreover, this effect is larger for brand-drugs than for generics. The claim made by this paper is that while the net effect on the German consumer was a higher out-of-pocket and therefore higher risk, it may nonetheless be a welfare increasing policy. The political problem for the public insurer is that, consumers will want to purchase supplementary insurance (or opt-out) since, taking the price of health care as given, they are under-insured. We show that the gain in profitability and the increase in price from marketconcentration is magnified by feed-back effects from the insurance market. The initial-price increase due to market consolidation leads to a change in an lowering 17

18 of the optimal coinsurance contract, and further increases in price. This suggests that mergers and acquisitions, may have a more deleterious effect on health care price than standard partial-equilibrium models of imperfect competition would suggest. Moreover, there are potentially large profits to be made by health care providers who successfully increase market concentration. We also consider a health-insurance market in the presence of a perfectlyprice discriminating monopoly provider. While such perfect price-discrimination is rare, it provides a device for analysing a situation in which consumers and insurers, rather than taking health care price as given, perfectly anticipate the impact that their insurance contract has on price. We show that when consumers anticipate the potential discounts to those with higher k, they may choose not to purchase insurance at all. If they do buy insurance, the equilibrium contract has a larger k than would be the case if there was no price discrimination. We find that consumers and health-care providers are better off if the latter can commit not to price discriminate. Preferred provider organisations, by negotiating the price of health care, prior to selling insurance, provides the institutional environment necessary for insurers to commit not to price discriminate. mixed. The evidence on whether providers do offer discounts to the uninsured is In the US, there has been a long-standing practice for hospitals to actually charge more to uninsured consumers than to PPOs and managed care organisations. More recently there has been a tendency for some hospitals to offer a discounts to uninsured. A particularly striking example comes from New Zealand, where a doctor is reported to have given uninsured patients a discount off the insurance company s recommended price for a vasectomy of NZD770. This discount was such that an uninsured patient s out-of-pocket expenditure would be the same as that of an insured patient, completely undermining the value of the insurance contract. 7 References 7 Doctor s cut leaves insurers wincing. New Zealand Herald, January 1999, p.3. 18

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