Optimal Health Care Contracts under Physician Agency
AbstractWe examine contracts between insurers and physicians when the treatment is chosen to maximize a combination of physician profit and patient benefit (“physician agency”). The degree of substitution between doctor profit and patient benefit in the physician-patient coalition is the physician’s private information, as is the patient’s intrinsic valuation of treatment quantity. The equilibrium mechanism only depends on the physician-patient coalition parameter. Moreover, the equilibrium mechanism exhibits extensive pooling, with prescribed quantity and physician reimbursement being insensitive to the agency characteristics or patient’s actual benefit. The optimal mechanism is interpreted as managed care where strict approval protocols are placed on treatments.
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Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2007-041.
Length: 35 pages
Date of creation: Jan 2007
Date of revision: Sep 2007
physician agency; optimal payment; health care quantity; managed care; minimum profit; asymmetric information;
Other versions of this item:
- Philippe CHONÉ & Ching-to Albert MA, 2011. "Optimal Health Care Contract under Physician Agency," Annales d'Economie et de Statistique, ENSAE, issue 101-102, pages 229-256.
- Ching-to Albert MA & Philippe CHONÉ, 2010. "Optimal Health Care Contract under Physician Agency," Boston University - Department of Economics - Working Papers Series WP2010-022, Boston University - Department of Economics.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- I1 - Health, Education, and Welfare - - Health
- I10 - Health, Education, and Welfare - - Health - - - General
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-CTA-2008-04-15 (Contract Theory & Applications)
- NEP-HEA-2008-04-15 (Health Economics)
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