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Principal Agency Theory and Health Care Utilization
Author(s) -
Schneider Helen,
Mathios Alan
Publication year - 2006
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbj025
Subject(s) - reimbursement , principal (computer security) , agency (philosophy) , principal–agent problem , actuarial science , health care , fee for service , service (business) , moral hazard , agency cost , business , economics , operations management , finance , microeconomics , incentive , computer science , marketing , computer security , shareholder , philosophy , corporate governance , epistemology , economic growth
This article uses a principal agent framework to examine the role that monitoring costs faced by an insurer have on health care utilization. We compare hospital lengths of stay for fee‐for‐service and capitated patients in low and high monitoring cost situations. Monitoring costs associated with a particular procedure are assumed to be high when there is large variation across patients in hospital lengths of stay. The empirical results indicate that differences in utilization between fee‐for‐service and capitated patients increase as monitoring costs increase. However, we do not find that fee‐for‐service reimbursement is used less in the difficult to monitor situations. (JEL I1 )