Three essays in health economics

This dissertation consists of three independent essays addressing three separate health care policy issues. Essay 1, "Incentive Effects of Government Mandated Cost-Shifting," shows how mandated cost shifting, because it does not require resources to pass through the hands of government, can be an optimal form of income redistribution in providing health care to the poor of society when government is sufficiently costly. Under this system, the government mandates the proper treatment of illness regardless of ability to pay and enforces that mandate with investigation. The paper shows that under costly information on illness the physician cheats by providing the wrong treatment when treating a rich patient who has low severity illness and a poor patient who has high severity illness. In response the government also investigates the treatment of such patients. The paper also shows the conditions under which mandated cost shifting is less wastehl and beneficial to patients. Essay 2,"The Effects of the Relationship between Quantity and Quality of Care on Quality of Care," shows that the relationship between quality and quantity in the patient's utility as well as in the cost of care play an important role in determining the ability of a payment scheme to induce efficient quality and quantity of care. The payment schemes examined are fixed fee for service, prospective payment, and cost sharing. The paper shows that neither prospective payment nor fixed fee for service can be used to induce a first-best provision of quality and quantity. Cost sharing is the only scheme that can be used to induce the efficient supply of both quantity and quality. Essay 3, "The Effect of Hospital Downsizing in British Columbia on the Quality of Care for Maternity Patients" uses maternity data from the Canadian province of British Columbia to estimate the effect of the reduction in hospital utilization rates and the transfer of care from hospitals to communities and to patients7 homes on readmission rates. The results show that the policy reduced hospital length of stay and increased readmission rates for maternity patients.