New perspectives on the role of information in health economics

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Does managed care effectively reduce medical costs without compromising treatment quality? This book explores critical questions surrounding reforms in the health care sector through three major studies. Insurers with managed care contracts can deny coverage for treatments prescribed by physicians, leading to significant criticism in the US. The first study reveals that while monitoring physicians can enhance healthcare efficiency, excessive insurer intervention may harm consumer welfare. Additionally, when premium payments do not align with individual risk types, insurers may engage in risk selection, or cream skimming. To combat this, several countries have implemented risk adjustment schemes. The second study critiques conventional risk adjustment, demonstrating that inaccurate schemes can negatively impact social welfare. It proposes an optimal payment model involving partial cost reimbursement based on insurer information. The third study introduces a formal model of the "watchfully waiting" process, which involves monitoring a patient's health over time to determine the necessity of medical intervention. It derives optimal decision rules for transitioning to direct intervention, offering insights applicable to various decision-making scenarios in health economics and medicine.