Pushing Back Against Private Practice: The Unintended Effects of Paying Public Doctors More

Most nations in the world have side-by-side private and public health care systems. Policymakers worry that “dual practice” across sectors might reduce care to the public sector. This concern led regions in Spain to offer “exclusivity bonuses” to physicians who practice exclusively in the public sector. We show theoretically that the impact of these bonuses on the public sector is ambiguous. We demonstrate empirically that the bonuses backfired: they did increase exclusive participation in the public sector, but significantly reduced hours of work. When regions added offsetting bonuses for dual practice, they were largely ineffective.