Will Privatization Reduce Costs?

I develop a model of public sector contracting based on the multitask framework by Holmström and Milgrom (1991). In this model, an agent can put effort into increasing the quality of a service or reducing costs. Being residual claimants, private owners have stronger incentives to cut costs than public employees. However, if quality cannot be perfectly measured, providing a private firm with incentives to improve quality forces the owner of the firm to bear risk. As a result, private firms will always be cheaper for low levels of quality but might be more expensive for high levels of quality. Extending the model to allow for differences in task attractiveness, I find that public firms shun unattractive tasks, whereas private firms undertake them if incentives are strong enough.Privatization; public sector contracting; incomplete contracts; contracting out

Will Privatization Reduce Costs?

I develop a model of public sector contracting based on the multitask framework by Holmström and Milgrom (1991). In this model, an agent can put effort into increasing the quality of a service or reducing costs. Being residual claimants, private owners have stronger incentives to cut costs than public employees. However, if quality cannot be perfectly measured, providing a private firm with incentives to improve quality forces the owner of the firm to bear risk. As a result, private firms will always be cheaper for low levels of quality but might be more expensive for high levels of quality. Extending the model to allow for differences in task attractiveness, I find that public firms shun unattractive tasks, whereas private firms undertake them if incentives are strong enough.Privatization; Public Sector Contracting; Incomplete Contracts; Contracting Out

Why Are Firms Sometimes Unwilling to Reduce Costs?

This paper establishes three new results for multiproduct oligopolies: 1) it presents the first explicit expression of Nash equilibria for asymmetric multiproduct oligopolies; 2) it shows that reducing a multiproduct firms cost in Bertrand oligopolies will reduce its profits if the cost-reducing unit is sufficiently small; and 3) it demonstrates that a multiproduct firm has no incentive to eliminate a product whose sales are zero. Because a single-product firm whose sales are zero is indifferent between exiting and staying, and its cost reductions always increase its profits, our results are unique to the multiproduct firm, and they suggest that extending oligopoly studies from a single product to multi-products could be as significant as the extension of calculus from a single variable to multi-variables.Effect of cost reduction, multiproduct oligopoly, price competition, quantity competition

Four Health Care Organizations' Efforts to Improve Patient Care and Reduce Costs

Synthesizes findings from four case studies in the Brookings-Dartmouth ACO Pilot Program about forming integrated systems that can deliver accountable care under shared-savings agreements with private payers

Hill Physicians Medical Group: Independent Physicians Working to Improve Quality and Reduce Costs

Describes how a group of independent physicians improved clinical outcomes through an innovative incentive system -- combining pay-for-performance and fee-for-service -- implemented with quality improvement processes. Discusses lessons learned

Real-time motion analytics during brain MRI improve data quality and reduce costs

Head motion systematically distorts clinical and research MRI data. Motion artifacts have biased findings from many structural and functional brain MRI studies. An effective way to remove motion artifacts is to exclude MRI data frames affected by head motion. However, such post-hoc frame censoring can lead to data loss rates of 50% or more in our pediatric patient cohorts. Hence, many scanner operators collect additional 'buffer data', an expensive practice that, by itself, does not guarantee sufficient high-quality MRI data for a given participant. Therefore, we developed an easy-to-setup, easy-to-use Framewise Integrated Real-time MRI Monitoring (FIRMM) software suite that provides scanner operators with head motion analytics in real-time, allowing them to scan each subject until the desired amount of low-movement data has been collected. Our analyses show that using FIRMM to identify the ideal scan time for each person can reduce total brain MRI scan times and associated costs by 50% or more

Health Care: How Can We Reduce Costs and Still Get the Care We Need?

Healthcare, a top domestic policy agenda in Congress and across the country since the passage of the Affordable Care Act in 2010, is a bellwether issue leading up to the 2016 presidential election. Public deliberation on the topic can provide the public voice necessary for policy makers to make sound decisions and this guide is designed to stimulate those types of discussions.The guide presents three options for addressing this complex public issue, which were researched and compiled by the Kettering Foundation, a nonpartisan research institute that studies the public's role in democracy. It provides an alternative means for moving forward in order to avoid polarizing rhetoric. They are as follows:As a Nation and as Individuals, We Need to Live within Our Means: raise Medicare eligibility age to 67 and base it on financial need, make greater use of hospice care, have employees take on a greater portion of the costs, and encourage more doctors to go into primary care;Make the Healthcare System More Transparent, Efficient, and Accountable: the US healthcare system suffers from a lack of design, making it impossible for citizens to make good decisions -- it needs transparency on cost/price, regulations and/or incentives to instill financial discipline and end greed and abuse; andTake Responsibility for Lowering Healthcare Costs by Focusing on Wellness: Unhealthy behaviors drive up healthcare costs by an estimated $147 billion a year -- collective and individual efforts to improve healthy behaviors can lower those costs.Each option is rooted in a shared concern and proposes several distinct strategies for addressing the problem. This guide does not favor any one option over another. Download your guide today for use in your classroom, research or policy organization or community to help citizens and those interested in policy better understand today's public policy challenges. It also includes some of the strategic facts needed to understand the context of the topic such as:Other technically advanced countries spent 33% to 66% less per person and 12% less of their economies on healthcareThe US ranked last among 26 other high income countries in infant mortality and life expectancyDespite spending far more on healthcare, we trail other countries in life expectancy and have higher rates of obesity, diabetes, heart diseases, and other ailment

Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency

This paper explores the empirical effects of competition on technical efficiency in the context of electricity industry restructuring. Restructuring programs adopted by many U.S. states made utilities residual claimants to cost savings and increased their exposure to competitive markets. We estimate the impact of these changes on annual generating plant-level input demand for non-fuel operating expenses, the number of employees and fuel use. We find that municipally-owned plants, whose owners were for the most part unaffected by restructuring, experienced the smallest efficiency gains over the past decade. Investor-owned utility plants in states that restructured their wholesale electricity markets had the largest reductions in nonfuel operating expenses and employment, while investor-owned plants in nonrestructuring states fell between these extremes. The analysis also highlights the substantive importance of treating the simultaneity of input and output decisions, which we do through an instrumental variables approach

Medicare Advantage Reforms: Comparing House and Senate Bills

Compares House and Senate approaches to reforming the Medicare Advantage payment system to reduce costs. Discusses geographic unit of payment, risk adjustments, quality management bonuses, and beneficiary protections and enrollment simplification