IDEAS home Printed from https://ideas.repec.org/p/hhs/ratioi/0209.html
   My bibliography  Save this paper

Resolving the Coordination Problem in Health Care: Limited Responsibility HMO:s

Author

Listed:
  • Lundbäck, Mattias

    (Ratio)

Abstract

The underlying reason for the lack of coordination of health care production is often attributed to the lack of central cost accountability for each individual patient. The rather few health care producers that manages to coordinate health care all the way from primary care to tertiary care are often used as good examples, e g Veterans administration, Kaiser Permanente, Intermountain Health Care and The Mayo Clinics. However, due to large cost variability amongst patients (economic risk), information asymmetries and agency problems, the provision of health care is rarely coordinated. More commonly, the delivery of health care production is reimbursed in a non-coordinated way that creates incentives for sub-optimisation and holds back entrepreneurship among producers. In this paper we use data from the Medical Expenditure Panel Survey and computer simulations to illustrate that limiting a provider’s cost responsibility for each patient is a much more efficient way of reducing provider risk than to increase the number of patients. Our simulations illustrate that introducing an individual yearly cost ceiling of 20 000 US-dollars per patient reduces risk as much as increasing the number of patients from 5 000 to 100 000. The results indicate that it might be possible to create a favourable environment for coordination in managed care organisations, such as those mentioned above, without exposing providers to extensive risk. Reimbursements systems of the type used in Medicare Advantage might thus be slightly adjusted to reduce the barriers of entry (economic risk) and promote the entry of integrated care providers on the market.

Suggested Citation

  • Lundbäck, Mattias, 2013. "Resolving the Coordination Problem in Health Care: Limited Responsibility HMO:s," Ratio Working Papers 209, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0209
    as

    Download full text from publisher

    File URL: http://ratio.se/app/uploads/2014/11/ml_209.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    reimbursement; health care; HMO; ACG; integrated care;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:ratioi:0209. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Korpi (email available below). General contact details of provider: https://edirc.repec.org/data/ratiose.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.