Preventive Health Care and Payment Systems
ABSTRACT Prevention has been a main issue of recent policy orientations in health care. This renews the interest on how different organizational designs and the definition of payment schemes to providers may affect the incentives to provide preventive health care. We focus on the externality resulting from referral decisions from primary to acute care providers. This makes our analysis complementary to most works in the literature allowing to address in a more direct way the issue of preventive health care. The analysis is performed through a series of examples combining different payment schemes at the primary care center and hospital. When hospitals are reimbursed according to costs, prevention efforts are unlikely to occur. However, under a capitation payment for the primary care center and prospective budget for the hospital, prevention efforts increase when shifting from an independent to an integrated management. Also, from a normative standpoint, optimal payment schemes are simpler under joint management.
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ABSTRACT: This article reviews the basic theoretical model of risk adjustment (Glazer/McGuire 2000) with a special focus on a coherent presentation of the main results. With adverse selection a regulator pursuing efficiency and solidarity objectives will need a risk adjustment scheme acting on a signal to accomplish both aims. With an imperfect signal this result will not hold. The regulator can react by trying to find more informative signals or by changing the calculation of the risk adjustment scheme (optimal risk adjustment). The model is then extended to derive results on the associated incentives regarding economic efficiency, manipulation of signals and innovation. The incentives will hold with perfect signals but may be violated in the imperfect signal setting. Optimal risk adjustment will most likely have a negative effect on these incentives. The results are contrasted with the empirical literature on the risk adjustment procedure in Germany which is centred on risk selection, the choice of risk adjustors and incentive effects. The paper concludes with an outlook on the ongoing reform of the German risk adjustment procedure.Boston University - Department of Economics, Boston University - Department of Economics - Working Papers Series. 01/2007;