Working Paper: NBER ID: w9797
Authors: Kenneth Leonard; Joshua Graff Zivin
Abstract: We compare the more common physician compensation method of fee-for-service to the less common payment-for-outcomes method. This paper combines an investigation of the theoretical properties of both of these payment regimes with a unique data set from rural Cameroon in which patients can choose between outcome and service based payments. We show that consideration of the role of patient effort in the production of health leads to important differences in the performance of these contracts. Theory and empirical evidence show that when illnesses require (or are responsive to) large amounts of both patient and practitioner effort, outcome based payment schemes are superior to effort based schemes. The traditional healer -- a practitioner who offers health services on an outcome-contingent basis -- is advanced as an important example of how patient effort can be better understood and tapped in health care.
Keywords: health care; payment schemes; patient effort; traditional healers
JEL Codes: I1; D8
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| choice between outcome-contingent payment schemes (J33) | health outcomes (I14) |
| patient and physician efforts (I11) | health outcomes (I14) |
| outcome-based payment schemes (J33) | health outcomes (I14) |
| patient effort + physician effort (I11) | health outcomes (I14) |
| effort-based payment schemes (J33) | health outcomes (I14) |
| traditional healers (I19) | health outcomes (I14) |
| patient effort (I11) | health outcomes (I14) |
| cooperative effort (P13) | health outcomes (I14) |