Economics Seminar Series

Nirav Mehta, Western University

Optimal Contracting with Altruistic Agents: A Structural Model of Medicare Reimbursements for Dialysis Drugs

Nirav Mehta.

Prof. Nirav Mehta

Abstract: We study physician agency and optimal payment policy in the context of an expensive medication (epoetin alfa) used with dialysis. Using Medicare claims data we estimate a model of treatment decisions, in which physicians are partially altruistic and value both their own compensation and their patients’ health. We then use the recovered parameters of the model in combination with results from contract theory to derive and simulate optimal linear and nonlinear reimbursement schedules. Comparing outcomes under these optimal contracts against those observed under the actual contracts suggests that substantial improvements in payment policy can be achieved within a fee-for-service framework.

Friday, February 8, 2019
3:30pm – 5:00pm
Fronczak 444