Would you like suspenders to go with that belt? An analysis of optimal combinations of cost sharing and managed care

Article Abstract:

Research was conducted to examine the whether and when it can be desirable to combine the two types of cost control, namely, patient-side cost sharing and provider-side payment or reimbursement limits. A diagrammatic model, which is an extension of Baumgardner's model and an adaptation of the Ellis-McGuire model, provides a critical role to the effectiveness of a variety of devices to control variation in use when severity varies. The model suggests that cost-sharing is more likely to improve efficiency, the greater the variation in illness severity and the smaller the degree of moral hazard.

Research, Medical care, Cost of, Health care costs, Managed care plans (Medical care)

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Reply to Anthony J. Culyer and Robert G. Evans

Article Abstract:

Anthony J. Culyer and Robert G. Evans misinterpreted an editorial comment written in response to a 1994 paper authored by R. Labelle, G. Stoddart and T. Rice. Contrary to the assertions of Culyer and Evans, the editorial piece indeed assumes that the recognition of welfare economic judgments as a basis for normative decisions calls for the acknowledgement of the principles of welfare economics. Culyer and Evans are wrong to assume that policymakers can be persuaded to shift from a Pareto-inferior position to a welfare economics position.

Analysis, Welfare economics

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