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Article: PRINCIPAL AGENCY THEORY AND HEALTH CARE UTILIZATION
- Article from:
- Economic Inquiry
- Article date:
- July 1, 2006
- Author:
CopyrightCopyright Western Economic Association Jul 2006. Provided by ProQuest LLC. (Hide copyright information)
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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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