Abstract

U.S. healthcare costs have experienced unsustainable growth, with expenditures of $2.5 T in 2009. A major factor in the cost of the U.S. healthcare system is related to the strategic behavior of system participants based on their incentives. This talk will consider two types of incentives: contractual incentives and knowledge-based incentives. Contracts may be used to align incentives in distributed systems. We consider an insurer contracting with two agents, a consumer and a provider, and solve the problem of optimal contracting in the presence of unobservable preventive efforts. Our results show that the provider must be given incentives when the consumer is healthy to induce effort, and that inducing provider effort allows an insurer to save on incentives given to the consumer. The insurer's multilateral contract always dominates the bilateral contract, and we illustrate the cost of information savings through examples. Secondly, we consider how a policy maker would provide knowledge as an incentive to consumers. This model generalizes to a dynamic model of health, and uses a learning model to transform the policy maker's problem into a Markov decision process. We utilize this framework to solve for optimal knowledge provision policies regarding behaviors pertinent to coronary heart disease.

Biographical Sketch

Brandon Pope is a Ph.D. candidate in the Department of Industrial and Systems Engineering at Texas A&M University. He received his B.S. in Mathematics from Abilene Christian University in 2006 and his M.E. in Industrial Engineering from Texas A&M University in 2008. His research interests lie in healthcare systems, including designing incentives for consumers, providers, and insurers; measuring efficiency and quality; and identifying efficient operational practices in hospital systems. Brandon is member of IIE and INFORMS, and served as the President of the Texas A&M Student Chapter INFORMS for the year 2009.