Health Care Management Papers


Insurer Incentives to Improve Health

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This paper will first examine several related models in which superior care not ’usual and customary’–and therefore not currently covered by insurers–is compared to usual and customary care. Patient and insurer behavior will be examined, and thus some of the reasons underlying the reason some cost-effective care is not covered will be elucidated. Although the paragraph above suggests a two-period model is appropriate, models will focus on the second period–that in which care is consumed–for simplicity. These models will then be used to examine a new type of insurance contract, which extend the pay-for-performance idea curently being pushed for physician and hospital reimbursement onto insurers. Arguments for why insurers are the proper level of the health system on which to pay based on performance will be provided. I call these new contracts pay-for-health arrangements (P4H), because by moving a pay-for-performance ideal onto an entity large enough to assume substantial risk, the metric used for reimbursement can be based on health outcomes rather than bureaucratically-determined process measures. This paper can be seen as the justification for the P4H metric and payment schemes examined in my final paper for HCMG900.

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game theory, insurance, health insurance

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Date Posted: 27 November 2017