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Information Disclosure and the Equivalence of Prospective Payment and Cost Reimbursement

Ching-to Ma () and Henry Mak ()

No WP2012-008, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: A health care provider chooses medical service quality and cost-reduction effort. Both choices are noncontractible. An insurer observes both quality and cost effort, and may credibly disclose them to consumers. In prospective payment, the insurer fully discloses care quality, and sets a prospective payment price. In cost reimbursement, the insurer discloses a value index, a weighted average of quality and cost effort, and pays a margin above cost. The first-best quality and cost effort can be implemented by prospective payment and by cost reimbursement.

Keywords: prospective payment; cost reimbursement; fee for service; quality; cost reduction (search for similar items in EconPapers)
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Date: 2012-01
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Related works:
Journal Article: Information disclosure and the equivalence of prospective payment and cost reimbursement (2015) Downloads
Working Paper: Information Disclosure and the Equivalence of Prospective Payment and Cost Reimbursement (2013) Downloads
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