Principal Agency Theory and Health Care Utilization |
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| Authors: | Helen Schneider Alan Mathios |
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| Affiliation: | Schneider:;Technical Staff Member, Economist, Group D-3, Mail Stop K575, Los Alamos National Lab, Los Alamos, NM 87545. Phone 1-505-664-0643, Fax 505-667-5531, E-mail Mathios:;Professor, Cornell University, Department of Policy Analysis and Management, Ithaca, NY 14820. Phone 1-607-255-2589, Fax 1-607-255-4071, E-mail |
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| Abstract: | 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 ) |
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