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Managed care and shadow price


  • Ching-to A. Ma


A managed-care company must decide on allocating resources of many services to many groups of enrollees. The profit-maximizing allocation rule is characterized. For each group, the marginal utilities across all services are equalized. The equilibrium has an enrollee group shadow price interpretation. The equilibrium spending allocation can be implemented by letting utilitarian physicians decide on service spending on an enrollee group subject to a budget for the group. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Ching-to A. Ma, 2004. "Managed care and shadow price," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 199-202.
  • Handle: RePEc:wly:hlthec:v:13:y:2004:i:2:p:199-202 DOI: 10.1002/hec.817

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    References listed on IDEAS

    1. Frank, Richard G. & Glazer, Jacob & McGuire, Thomas G., 2000. "Measuring adverse selection in managed health care," Journal of Health Economics, Elsevier, vol. 19(6), pages 829-854, November.
    2. Keeler, Emmett B. & Carter, Grace & Newhouse, Joseph P., 1998. "A model of the impact of reimbursement schemes on health plan choice," Journal of Health Economics, Elsevier, vol. 17(3), pages 297-320, June.
    3. Glazer, Jacob & McGuire, Thomas G., 2002. "Setting health plan premiums to ensure efficient quality in health care: minimum variance optimal risk adjustment," Journal of Public Economics, Elsevier, vol. 84(2), pages 153-173, May.
    4. Pauly, Mark V. & Ramsey, Scott D., 1999. "Would you like suspenders to go with that belt? An analysis of optimal combinations of cost sharing and managed care," Journal of Health Economics, Elsevier, vol. 18(4), pages 443-458, August.
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    Cited by:

    1. Pau Olivella & Marcos Vera-Hernandez, 2010. "How complex are the contracts offered by health plans?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(3), pages 305-323, July.
    2. Samwer Martina C., 2008. "When Less Liability Leads to More Care: Adverse Effects of Liability Regimes in Multitask Principal Agent Settings," Review of Law & Economics, De Gruyter, vol. 4(2), pages 641-664, December.
    3. William Jack(Georgetown University), 2004. "Optimal risk adjustment in a model with adverse selection and spatial competition," Working Papers gueconwpa~04-04-15, Georgetown University, Department of Economics.
    4. Karen Eggleston & Anupa Bir, 2009. "Measuring Selection Incentives in Managed Care: Evidence From the Massachusetts State Employee Insurance Program," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 159-175.

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