Static and Dynamic Efficiency of Irreversible Health Care Investments under Alternative Payment Rules

The paper studies the incentive for providers to invest in new health care technologies under alternative payment systems, when the patients' benefits are uncertain. If the reimbursement by the purchaser includes both a variable (per patient) and a lump-sum component, efficiency can be ensured both in the timing of adoption (dynamic) and the intensity of use of the technology (static). If the second instrument is unavailable, a trade-off may emerge between static and dynamic efficiency. In this context, we also discuss how the regulator could use the control of the level of uncertainty faced by the provider as an instrument to mitigate the trade-off between static and dynamic efficiency. Finally, the model is calibrated to study a specific technology.


Issue Date:
2010-11
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/98047
Total Pages:
34
JEL Codes:
I18; D92
Series Statement:
IM
130.2010




 Record created 2017-04-01, last modified 2017-08-25

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