Portuguese Economic Journal, 2003, Volume 2, Nº 2
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- The economics of crowd out under mixed public/private health insurancePublication . Encinosa, WilliamIt is well known that public insurance sometimes crowds out private insurance. Yet, the economic theory of crowd out has remained unstudied. Here, I show that crowd out causes two countervailing effects: (a) the intensive margin effect–since high demanders are crowded out, the private market now has a larger proportion of low demanders on the intensive margin (The intensive margin are those who have already bought private insurance), and so will drop quality to lower the price to the low demanders’ liking; and (b) the extensive margin effect–before the public insurance expansion, the private sector had lowered quality to make insurance more affordable at the extensive margin (The extensive margin is the next group of people who would buy private insurance if the price decreased), but now that public insurance crowds out the extensive margin, quality can then be raised back up to the high demanders’ liking. If the extensive margin effect dominates, then a new phenomenon of push out occurs, in which crowd out causes the private sector to raise quality and to increase the number of uninsured low demanders not eligible for public insurance. If the intensive margin effect dominates, then crowd out will cause the private sector to lower quality, causing the phenomenon of crowd-in, in which the number of uninsured low demanders that take-up private insurance increases. These two countervailing effects have important implications for any government policy that desires to eradicate all uninsurance. First, if push out is dominant, then the private sector will respond to the public insurance by pushing out and leaving some people newly uninsured. If crowd-in is dominant, then all people can be insured and the government can do it at a lower-than-anticipated level of expansion due to the private sector crowding in.
- Optimal payment schemes for physiciansPublication . Levaggi, Rosella; Rochaix, LiseIncreasingly, physicians’ payment schemes are being reformed to en- hance performance and to ensure an optimal allocation of scarce medical resources. The empirical evidence points towards the use of mixed payment schemes that appear better at achieving efficiency than either lump sum payments (such as cap- itation) or piece rates (fee for service). Yet, this alleged superiority remains to be established from a theoretical standpoint. The Principal-Agent model developed in this paper offers a contribution in this line, with a primary care physician as agent and a public regulator as principal. Alternative specifications of the princi- pal’s objective function are considered in the model (efficiency versus fairness). Uncertainty is introduced by two random variables that represent the probability for an individual of being ill and his productivity parameter which determines the amount of resources (the physician’s effort in particular) necessary to restore health. The relationship is characterised by information asymmetry since the physician is assumed to observe both variables after the contract has been signed, but before choosing his effort level. Both selection and moral hazard issues are addressed in the model and the results show that, under GP risk neutrality, mixed payment schemes fully correct for both types of information asymmetry.
- Treatment effects of selection behavior in managed care plans : evidence from MedicaidPublication . Gomes, Carla S.This paper tests whether capitated payments to Medicaid managed care plans induce to plans’ strategic undercutting of treatment for specific diagnostic groups. I focus on treatment (measured by length of stay and cost) in acute care hospitals in Massachusetts. I use a “differences-in-differences-in-differences” ap- proach, where the third differences compare treatment patterns between managed care plans that receive capitated payments with those that do not. I find that the first reduce treatment significantly more to mental health patients than to patients in other disease groups, whereas the latter reduce hospital resource use more uniformly across disease groups. These results highlight the importance of using payment mechanisms in public programs that reflect the variability in costs of beneficiaries.