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Information Disclosure and the Equivalence of Prospective Payment and Cost Reimbursement

Ching-to Ma () and Henry Y. Mak ()
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Henry Y. Mak: Indiana University-Purdue University Indianapolis

No 2013-018, 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 e§ort. Both choices are non- contractible. An insurer observes both quality and cost e§ort, 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 e§ort, and pays a margin above cost. The Örst-best quality and cost e§ort can be implemented by prospective payment and by cost reimbursement.

Keywords: information disclosure; prospective payment; cost reimbursement; fee for service; quality; cost reduction (search for similar items in EconPapers)
Date: 2013
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http://www.bu.edu/econ/files/2014/05/Ma-Informatio ... ce-November-2013.pdf First version, 2013 (application/pdf)

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 (2012) Downloads
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