DP20283 Patient Choice, Payment Systems and Multidimensional Quality
Price regulation and managed competition are widely used to promote quality in healthcare markets, yet quality is often multi-dimensional and weakly correlated across dimensions. This paper studies how such multidimensionality affects price regulation, patient allocation and provider behavior in the English market for public General Practitioner (GP) services. Using counterfactual simulations, we evaluate reforms that reduce quality-related payments. Our results suggest that a reduction can improve total welfare, partly due to practices re-optimizing following patient preferences. Absent externalities, consumer surplus is maximized at a 40% level of quality-related payments. We also show that using patient preferences to design optimal payments increases welfare.
