Working Papers:
Optimal Compensation Rule: Pay-For-Performance Versus Fee-For-Service
(Job Market Paper)
This paper examines the optimal non-linear compensation rule of physicians under pay-for-performance, fee-for-service and capitation in the presence of both adverse selection and moral hazard on the supply side. We provide an argument for the criticism on the shortcomings of fee-for-service. More importantly, we also provide a rationale for the continued use of fee-for-service payment even though the serious problems with fee-for-service have been widely acknowledged. We show that when only moral hazard is considered, the optimal compensation policy does not pay for services. However, when both adverse selection and moral hazard are considered, the optimal policy requires a continued use of fee-for-service.
Health Care Insurance-Payment Policy when Physician and Patient May Collude (with David Bardey and Sanxi Li)
(available upon request)
This paper analyzes the three-parties contracting problem among the payer, the patient and the physician when the patient and physician may collude to exploit mutually beneficial opportunities. We study the centralized message game and assume that the patient and physician submit the diagnosis to the payer through a bargaining process where side-transfer is ruled out. The weak collusion-proof incentive compatible insurance-payment scheme is such that one of them tells the truth is sufficient. If the DRGs are coarse, it is better to put incentives on the patient; on the contrary, if the DRGs are fine, it is better to put incentives on the physician. We also show that when side transfer is ruled out, a two-stage mechanism can uniquely implement the first best outcome as a subgame-perfect equilibrium.
Migration, Risk-sharing and Consumption Insurance in Thai Villages (with Ju Qiu)
(available upon request)
This paper examines whether migration crowds out informal risk-sharing contracts and leads to less consumption insurance in Thai villages. Our idea is that migration may be used as a cash-in-advance contract between the family and the child, which changes the income process as well as the income diversification of the households. The theoretical motivation uses a dynamic limited commitment model to show that the current period consumption depends on the availability of the remittance, the incentive of standing alone, and the degree of risk aversion. In the empirical part, we test the equilibrium effects of migration on the risk-sharing markets. The data that we used is a panel from Townsend Thai Annual Surveys (1997-2010). Our results show that migration leads to less consumption insurance in Thai villages. Households who send away migrants are less insured compared to those who do not send migrants. Despite strong evidence in the literature showing that migration serves as an ex-ante or an ex-post way of risk mitigation for households, our fndings from the data support our conjecture that migration crowds out informal risk-sharing and leads to less consumption insurance in Thai villages.