Asymmetric Information and Outcome-based Compensation in Health Care – Theoretical Implications
AbstractThe discussion about health care systems focuses on the dynamics of expenditures and on the weak growth of revenues. In this discussion it is widely overseen that medical expenditures and the supply of medical services depend crucially on the compensation of physician services. The paper analyzes the implementation of an outcome-based payment system in the presence of asymmetric information. Two cases are studied in detail. First, the common situation of physician’s moral hazard is analyzed. Second, a double moral hazard model is developed. Here, the patient’s actions influence health outcome and cannot be monitored by the physician. It is shown that the choice of insurance and payment contracts depends on the characteristics of asymmetric information. In addition, lack of knowledge about health status and productivity of health inputs prevent a solution using outcome-based contracts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series HEW with number 0501006.
Length: 29 pages
Date of creation: 17 Jan 2005
Date of revision:
Note: Type of Document - pdf; pages: 29
Contact details of provider:
Web page: http://126.96.36.199
outcome-based contract; double moral hazard; health policy;
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mingshan Lu & Lasheng Yuan, 1999.
"Risk Selection and Matching in Performance-Based Contracting,"
1999-06, Department of Economics, University of Calgary, revised 02 Nov 1999.
- Mingshan Lu & Ching-to Albert Ma & Lasheng Yuan, 2003. "Risk selection and matching in performance-based contracting," Health Economics, John Wiley & Sons, Ltd., vol. 12(5), pages 339-354.
- Mingshan Lu & Ching-to Albert Ma & Lasheng Yuan, 2000. "Risk Selection and Matching in Performance-Based Contracting," Papers 0101, Boston University - Industry Studies Programme.
- S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor and Francis Journals, vol. 22(1), pages 1-3, January.
- Udo Schneider, 2004.
"Asymmetric Information and the Demand for Health Care – the Case of Double Moral Hazard,"
Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften,
Duncker & Humblot, Berlin, vol. 124(2), pages 233-256.
- Udo Schneider, 2004. "Asymmetric Information and the Demand for Health Care - the Case of Double Moral Hazard," HEW 0409001, EconWPA.
- Ching-to Albert Ma, 1994.
"Health Care Payment Systems: Cost and Quality Incentives,"
0047, Boston University - Industry Studies Programme.
- Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
- Stewart, Jay, 1994. "The Welfare Implications of Moral Hazard and Adverse Selection in Competitive Insurance Markets," Economic Inquiry, Western Economic Association International, vol. 32(2), pages 193-208, April.
- Udo Schneider, 2002. "Beidseitige Informationsasymmetrien in der Arzt-Patient-Beziehung: Implikationen für die GKV," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 71(4), pages 447-458.
- Ching-to Albert Ma & Thomas G. McGuire, 1995.
"Optimal Health Insurance and Provider Payment,"
0059, Boston University - Industry Studies Programme.
- Kenneth Leonard & Joshua Graff Zivin, 2003.
"Outcome Versus Service Based Payment in Health Care: Lessons from African Traditional Healers,"
NBER Working Papers
9797, National Bureau of Economic Research, Inc.
- Kenneth L. Leonard & Joshua Graff Zivin, 2005. "Outcome versus service based payments in health care: lessons from African traditional healers," Health Economics, John Wiley & Sons, Ltd., vol. 14(6), pages 575-593.
- Chalkley, M. & Malcomson, J.M., 1995.
"Contracting for health services with unmonitored quality,"
Discussion Paper Series In Economics And Econometrics
9510, Economics Division, School of Social Sciences, University of Southampton.
- Chalkley, Martin & Malcomson, James M, 1998. "Contracting for Health Services with Unmonitored Quality," Economic Journal, Royal Economic Society, vol. 108(449), pages 1093-1110, July.
- Rees, Ray, 1985. "The Theory of Principal and Agent: Part 1," Bulletin of Economic Research, Wiley Blackwell, vol. 37(1), pages 3-26, January.
- Selden, Thomas M., 1990. "A model of capitation," Journal of Health Economics, Elsevier, vol. 9(4), pages 397-409, December.
- Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
- De Fraja, Gianni, 2000. "Contracts for health care and asymmetric information," Journal of Health Economics, Elsevier, vol. 19(5), pages 663-677, September.
- Chalkley, Martin & Malcomson, James M, 1996. "Contracts for the National Health Service," Economic Journal, Royal Economic Society, vol. 106(439), pages 1691-1701, November.
- Chalkley, M. & Malcomson, J.M., 1996. "Contracts for National Health Service," Discussion Paper Series In Economics And Econometrics 9641, Economics Division, School of Social Sciences, University of Southampton.
- Schmid, Andreas, 2007. "Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina," MPRA Paper 23311, University Library of Munich, Germany, revised 2008.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.