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.
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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
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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
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