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Cost Sharing in Health Service Provision: An Empirical Assessment of Cost Savings

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  • James Malcomson
  • Martin Chalkley

Abstract

Fixed price payments for treatment of patients with a specified diagnosis are widespread in both US Medicare and the British NHS even though there are substantial variations in the cost of treatment. Theory suggests that, when there is asymmetric information about those costs, total payment can be reduced by cost sharing. This paper uses data from Medicare to assess the cost savings that might be feasible in practice from cost sharing. For diagnosis related groups with low cost variation, the calculated cost savings are approximately 7%. For those with high cost variation, the calculated cost savings are more than 60%.

Suggested Citation

  • James Malcomson & Martin Chalkley, 2001. "Cost Sharing in Health Service Provision: An Empirical Assessment of Cost Savings," Economics Series Working Papers 69, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:69
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    More about this item

    Keywords

    health services; Medicare; cost sharing; fixed prices;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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