Competition, Insurance, and Quality in the Market for Advanced Infertility Treatment

For the 10%-15% of American married couples who experience reproductive problems, in vitro fertilization (IVF) is the leading technologically advanced treatment procedure. Two important issues are at the center of policy debates regarding IVF markets: 1) expanding access to infertility treatment, and 2) encouraging IVF clinics and patients to minimize the risk of multiple births, which can be expensive and dangerous. This paper evaluates the two principle policy proposals –insurance mandates and competition restrictions –for meeting these issues. Insurance mandates, which require that insurers pay for a couple’s initial IVF treatments, succeed in attracting more patients into the market while also reducing multiple birth risks, but mandates may unfavorably a¤ect clinics’incentives to use new treatment technology. Competition restrictions have been proposed as a way to reduce risky behavior by clinics and patients, but we …nd that this reasoning does not apply to the U.S. IVF market. Like insurance mandates, additional competition can substantially increase the number of patients while reducing the multiple birth rate. Keywords: infertility; in vitro fertilization (IVF); access to IVF treatment; multiple births; insurance mandates; competition restrictions. JEL Classi…cations: I110 Analysis of Health Care Markets; L100 Market Structure, Firm Strategy, and Market Performance: General We thank Lyda Bigelow, Gautam Gowrisankaran, Glenn MacDonald, Randall Odem, and seminar participants at Northwestern, Washington University, and the 2003 UBC summer IO conference for many helpful comments. Thomas Piper, Director of the Missouri CON program, provided us with information on state CON laws. Peter Laakman, Jason Liauw, and Mindy Marks provided excellent research assistance. Contact information: Hamilton: [email protected], 314-935-8057; McManus: [email protected], 314-935-4915. John M. Olin School of Business, Washington University in St. Louis, Campus Box 1133, One Brookings Dr., St. Louis, MO 63130.