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Multiple pricing for personal assistance services

Author

Listed:
  • Andersson, Tommy
  • Ellegård, Lina Maria
  • Enache, Andreea
  • Erlanson, Albin
  • Thami, Prakriti

Abstract

Third-party payers often reimburse health care providers based on prospectively set prices. Although a key motivation of prospective payment is to contain costs, this paper shows that this aspect crucially depends on the design of the pricing scheme due to the well-known incentives of patient selection (or “dumping”). This paper provides a general theoretical framework where heterogeneous users are served by either private for-profit or public providers, each paid an hourly compensation by a third-party payer. The private, but not the public providers may select patients. It is demonstrated that this realistic feature of the model implies that total costs depends on the number of prices. The features of the model is illustrated using the Swedish system of personal assistance services as a motivating example. Numerical results show that marginal adjustments to the current uniform pricing scheme would lead to substantial savings.

Suggested Citation

  • Andersson, Tommy & Ellegård, Lina Maria & Enache, Andreea & Erlanson, Albin & Thami, Prakriti, 2024. "Multiple pricing for personal assistance services," Economic Modelling, Elsevier, vol. 141(C).
  • Handle: RePEc:eee:ecmode:v:141:y:2024:i:c:s0264999324002736
    DOI: 10.1016/j.econmod.2024.106916
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    More about this item

    Keywords

    OR in health services; Personal assistance; Public and private providers; Multiple pricing; Welfare; Dumping;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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