Market Power, Contracts and Outcomes: The Case of Patients with Long-term Diseases in the Colombian Health Care System

We study the effects of capitation and fee-for-service contracts between insurers and service providers in the Colombian health care system. We focus on chronic patients who are identical at the time of diagnosis and show that... [ view full abstract ]

We study the effects of capitation and fee-for-service contracts between insurers and service providers in the Colombian health care system. We focus on chronic patients who are identical at the time of diagnosis and show that both types of contracts are significantly correlated with di erent outcomes. These results are consistent with contract theory and the economics of asymmetric information. Moreover, we show that the contract type depends on the relative market power of insurers and providers.