Patient Dumping, Outlier Payment, and Optimal Healthcare Payment Policy under Asymmetric Information
AbstractWe analyze the rationale for official authorization of patient dumping in the prospective-payment policy framework. We show that when the insurer designs the healthcare payment policy to let hospitals dump high-cost patients, there is a trade-off between the disutility of dumped patients (changes in hospitals' rent extracting due to low-severity patients) and the shift in the cost-reduction effort level for high-severity patients. We also clarify the welfare-improving conditions by allowing hospitals to dump high-severity patients. Finally, we show that if the efficiency of the cost-reduction effort varies by much and the healthcare payment cost is large, or if there exist many private hospitals, the insurer can improve social welfare in a wider environment.
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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0891.
Date of creation: Dec 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-29 (All new papers)
- NEP-CTA-2013-12-29 (Contract Theory & Applications)
- NEP-HEA-2013-12-29 (Health Economics)
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