Demand-side Cost Research Articles

Iterate to Innovate: How Firms Strategize Design Iteration to Navigate the Uneven Landscape in the Global Mobile Application Industry

Digital firms constantly iterate products to capture innovation opportunities. As digitalization transforms the global marketplace, firms all over the world must strategize iteration across various institutional contexts. My dissertation starts by establishing that firms need to be cautious about introducing iteration given its demand-side costs. Further, I find that frequent iterations enable digital firms to become innovative in uncertain institutional environments compared to stable environments. Moreover, iterating with regular rhythms help firms diversify across platform markets, but not so if firms diversify across heterogeneous country markets. Hence, both institutional conditions and market diversification must be considered when strategizing iteration.

A systematic review of strategies used for controlling consumer moral hazard in health systems

BackgroundConsumer moral hazard refers to an increase in demand for health services or a decrease in preventive care due to insurance coverage. This phenomenon as one of the most evident forms of moral hazard must be reduced and prevented because of its important role in increasing health costs. This study aimed to determine and analyze the strategies used to control consumer moral hazards in health systems.MethodsIn this systematic review. Web of Sciences, PubMed, Scopus, Embase, ProQuest, Iranian databases(Magiran and SID), and Google Scholar engine were searched using search terms related to moral hazard and healthcare utilization without time limitation. Eligible English and Persian studies on consumer moral hazard in health were included, and papers outside the health and in other languages were excluded. Thematic content analysis was used for data analysis.ResultsContent analysis of 68 studies included in the study was presented in the form of two group, six themes, and 11 categories. Two group included “changing behavior at the time of receiving health services” and “changing behavior before needing health services.” The first group included four themes: demand-side cost sharing, health savings accounts, drug price regulation, and rationing of health services. The second approach consisted of two themes Development of incentive insurance programs and community empowerment.ConclusionStrategies to control consumer moral hazards focus on changing consumer consumptive and health-related behaviors, which are designed according to the structure of health and financing systems. Since “changing consumptive behavior” strategies are the most commonly used strategies; therefore, it is necessary to strengthen strategies to control health-related behaviors and develop new strategies in future studies. In addition, in the application of existing strategies, the adaptation to the structure of the health and financing system, and the pattern of consumption of health services in society should be considered.

Distributed Energy Trading in Smart Grid Over Directed Communication Network

This paper presents a distributed solution for energy trading in smart grid with voltage and congestion management. In the proposed approach, the energy trading is formulated with a distributed consensus algorithm to optimize both generation- and demand-side cost functions based on incremental cost. The proposed approach is designed for directed communication networks.

Health care utilization and spending among privately insured children with medical complexity.

Children with medical complexity have high health service utilization and health expenditures that can impose significant financial burdens. This study examined these issues for families with children enrolled in US private health plans. Using IBM Watson/Truven Analytics℠ MarketScan® commercial claims and encounters data (2012-2014), we analyzed through regression models, the differences in health care utilization and spending of disaggregated health care services by health plan types and children's medical complexity levels. Children in consumer-driven and high-deductible plans had much higher out-of-pocket spending and cost shares than those in health maintenance organizations and preferred provider organizations (PPOs). Children with complex chronic conditions had higher service utilization and out-of-pocket expenditures while having lower cost shares on various categories of services than those without any chronic condition. Compared to families covered by PPOs, those with high-deductible or consumer-driven plans were 2.7 and 1.7 times more likely to spend over US$1000 out of pocket on their children's medical care, respectively. Families with higher complexity levels were more likely to experience financial burdens from expenditures on children's medical services. In conclusion, policymakers and families with children need to be cognizant of the significant financial burdens that can arise from children's complex medical needs and health plan demand-side cost sharing.

Poster abstract: demand response market considering dynamic pricing

In this work, a power market framework is presented comprised of demand response aggregators (DRAs) trading energy stored in residential batteries. Competition is modeled by a Stackelberg game, with market clearing hourly, which determines each DRAs bidding strategy that will maximize payoff. The magnitude and price of power transactions allowable is controlled by the game’s leader. Dynamic pricing is considered in two forms. As demand updates, dynamic economic dispatch is used to update utility generator dispatch. The marginal electrical price offered by the utility updates each time interval reflecting updated supply and demand (real time pricing). Time-of-use load scheduling through dynamic programing combined with dynamic pricing optimizes load scheduling and reduces total demand in the system. The method schedules utility generation minimizing supply-side operational cost, and in turn, demand-side electricity cost at all times (valley, peak, off-peak) and is thus mutually advantageous.

Controlling cost escalation of healthcare: making universal health coverage sustainable in China

An increasingly number of low- and middle-income countries have developed and implemented a national policy towards universal coverage of healthcare for their citizens over the past decade. Among them is China which has expanded its population coverage by health insurance from around 29.7% in 2003 to over 90% at the end of 2010. While both central and local governments in China have significantly increased financial inputs into the two newly established health insurance schemes: new cooperative medical scheme (NCMS) for the rural population, and urban resident basic health insurance (URBMI), the cost of healthcare in China has also been rising rapidly at the annual rate of 17.0%% over the period of the past two decades years. The total health expenditure increased from 74.7 billion Chinese yuan in 1990 to 1998 billion Chinese yuan in 2010, while average health expenditure per capital reached the level of 1490.1 Chinese yuan per person in 2010, rising from 65.4 Chinese yuan per person in 1990. The repaid increased population coverage by government supported health insurance schemes has stimulated a rising use of healthcare, and thus given rise to more pressure on cost control in China.There are many effective measures of supply-side and demand-side cost control in healthcare available. Over the past three decades China had introduced many measures to control demand for health care, via a series of co-payment mechanisms. The paper introduces and discusses new initiatives and measures employed to control cost escalation of healthcare in China, including alternative provider payment methods, reforming drug procurement systems, and strengthening the application of standard clinical paths in treating patients at hospitals, and analyses the impacts of these initiatives and measures. The paper finally proposes ways forward to make universal health coverage in China more sustainable.

Supply-side and demand-side cost sharing in deregulated social health insurance: Which is more effective?

Microeconomic theory predicts that if patients are fully insured and providers are paid fee-for-service, utilization of medical services exceeds the efficient level (‘moral hazard effect’). In Switzerland, both demand-side and supply-side cost sharing have been introduced to mitigate this problem. Analyzing a panel dataset of about 160,000 adults, we find both types of cost sharing to be effective in curtailing the use of medical services. However, when moral hazard mitigation is traded off against risk selection, the minimum-deductible, supply-side cost sharing option ranks first, followed by the medium-deductible demand-side alternative, making the supply-side option somewhat more effective.

Some pain, no gain: experiences with the no-claim rebate in the Dutch health care system

To contain expenditures in an increasingly demand driven health care system, in 2005 a no-claim rebate was introduced in the Dutch health insurance system. Since demand-side cost sharing is a very controversial issue, the no-claim rebate was launched as a consumer friendly bonus system to reward prudent utilization of health services. Internationally, the introduction of a mandatory no-claim rebate in a social health insurance scheme is unprecedented. Consumers were entitled to an annual rebate of 255 eruos if no claims were made. During the year, all health care expenses except for GP visits and maternity care were deducted from the rebate until the rebate became zero. In this article, we discuss the rationale of the no-claim rebate and the available evidence of its effect. Using a questionnaire in a convenience sample, we examined people's knowledge, attitudes, and sensitivity to the incentive scheme. We find that only 4% of respondents stated that they would reduce consumption because of the no-claim rebate. Respondents also indicated that they were willing to accept a high loss of rebate in order to use a medical treatment. However, during the last month of the year many respondents seemed willing to postpone consumption until the next year in order to keep the rebate of the current year intact. A small majority of respondents considered the no-claim rebate to be unfair. Finally, we briefly discuss why in 2008 the no-claim rebate was replaced by a mandatory deductible.

Maternal fee exemption in Senegal: is the policy a success?

This article describes a qualitative research component of an evaluation of the national free delivery and caesarean policy (FDCP) in Senegal. Its aim was to establish community awareness and views on the policy, as well as perceived changes to cost and quality of services. 106 community representatives participated in in-depth interviews and focus group discussions in four FDCP regions in November and December 2006. Awareness of the policy was patchy and respondents found that the concept of ‘free’ services was inappropriate even in theory, given that only certain costs were covered by the policy. In practice most reported that costs had not reduced significantly as a result of the policy, with the exception of caesareans in some areas. Transport and drugs are the major costs for households and neither is adequately covered by the FDCP. In some cases drugs costs have even risen. Moreover those living in remote areas are unable to benefit from this facility-based subsidy. Gender differences in relation to payment and decision making around delivery were also found. Policies to increase access to skilled care at delivery by reducing household costs need to target the core costs, such as drugs, and also to increase the predictability of charges. Extending infrastructure and addressing demand side costs are additional essential elements to reach the poorest in the community.

Reconsidering the moral hazard-risk avoidance tradeoff

The received model for optimal demand-side cost sharing trades off moral hazard and risk avoidance. This model appears to lie behind recent increases in initial cost sharing, such as those embodied in Health Savings Accounts and Health Reimbursement Accounts. At the same time there is evidence that lower cost sharing for certain drugs can reduce future total health care costs and/or improve future health, and this may be true of other medical services as well. To the degree that individuals remain in the same common insurance pool, lower cost sharing that induces increases in certain services that reduce total costs, including future costs, represents a classic case for a subsidy and will minimize an employer's labor costs. Even if total costs increase, the value of a change in health could increase more. In that case such a subsidy is consistent with recent work in behavioral economics for those with self-control problems.

Information asymmetry, insurance, and the decision to hospitalize

We analyze the problem of second-best optimal health insurance in the context of a model in which patients and doctors must decide not only on an aggregate quantity of health services to use in treating various kinds of illness, but also have a choice between different kinds of providers (in particular, outpatient services rendered by primary-care physicians or inpatient services provided by hospital-based specialists). We consider well-informed patients’ choices of provider when they have conventional insurance so they only pay part of the cost of their health services, as well as the equilibrium strategies of doctors and patients when there is patient-provider asymmetry; in the latter case we also analyze a managed-care insurance setup under which doctors are paid by capitation. We find that under certain plausible conditions, second-best optimal managed-care plans with supply-side incentives dominate second-best optimal conventional plans that rely on cost control through demand-side cost sharing.

Robust commit time decisions and bounds for measuring demand-side quality costs

In this paper, we discuss a single machine processing multi-product situation. The upper and lower bounds of demand-side costs and optimal commit delivery time range with only the mean and standard deviation of the processing time distribution are obtained. We propose two robust commit delivery times, one using the mid-point of the optimal solution range and the other using the min-max regret criterion. The expected value of distribution information, which measures the maximum amount a decision-maker is willing to pay for the true knowledge of the distribution, is used to evaluate the performance of the delivery times. An extension to the situation where information of orders in a queue is available is also discussed. Numerical examples show that both decision rules are promising, and they have potential for practical applications.

Risk Selection and Optimal Health Insurance-Provider Payment Systems

ABSTRACT This article presents a model of the important health-policy dilemmas of risk selection and moral hazard. When providers can increase revenues by selecting favorable risks, capitation or purely prospective payment is unlikely to be optimal. A payment system may involve mixed levels of both demand- and supply-side cost sharing: consumers may prefer to pay deductibles and co-payments rather than to have their healthcare providers receive large financial rewards for skimping on care or discriminating against expensive-to-treat patients. Risk adjustment can improve the terms of the social trade-off between inefficient utilization and inequitable coverage. The role of professional ethics is also considered. INTRODUCTION It has been recognized for a long time that how we pay healthcare providers and how we insure consumers against the risks of medical expenditures--that is, how we design health insurance-provider payment systems--can have significant consequences for the equity and efficiency of a healthcare system. Health insurance creates a problem of moral hazard: fully insured consumers tend to overuse services that appear to be free or are heavily subsidized. Demand-side cost sharing (e.g., deductibles and co-insurance), often used to discourage this over-utilization, compromise the purpose of insurance by making the consumer pay unpredictable, nontrivial co-payments. Alternatively, providers can be given financial incentives to restrict care. Since providers have considerable influence over treatment decisions, supply-side cost sharing can be a powerful instrument for controlling healthcare costs. Along with the good incentives to curb wasteful over-utilization, however, are bundled perverse incentives to deny benefic ial but costly services and to shun the sickest patients (risk selection). Part of the recent backlash against managed care in the United States stems from consumer discontent with such potentially quality-damaging cost-control measures. [1] This article develops a simple model to illustrate the incentive trade-offs associated with the dual failures of moral hazard and risk selection. Previous theoretical results on optimal payment systems emerge as the special case of our model when there is no consumer heterogeneity. The model suggests that when providers can increase revenues by selecting favorable risks, demand- and supply-side cost sharing [2] can no longer in general achieve the social optimum. The second best optimal payment system may involve mixed levels of both demand- and supply-side cost sharing. Purely prospective or capitation payment is unlikely to be optimal. The results underscore the fact that policymakers seeking cost containment, patient choice, and universal access must attend to selection incentives when designing or reforming healthcare systems. The article is organized as follows. The first section gives an overview of the policy significance of risk selection. The next section presents the model. Then, the article focuses on how the presence of risk selection alters previously derived results on optimal payment systems. A simple extension to risk adjustment of provider payments is presented in the fourth section. The following section puts the model in the context of previous theoretical work. The conclusion discusses limitations and other potential extensions. THE POLICY IMPORTANCE OF RISK SELECTION A healthcare provider-insurer or health plan has a financial interest in trying to enroll consumers at low risk for treatment and to discourage high-risk consumers from enrolling. Such behavior is called risk selection. Newhouse (1996) defines selection as actions of economic agents on either side of the market to exploit unpriced risk heterogeneity and break pooling arrangements, with the result that some consumers may not obtain the insurance they desire (p. 1236). [3] Selection leads to inefficiency as well as inequity [4] because it defeats risk pooling and prevents individuals from being able to buy insurance against becoming a bad risk in the future or having a child who is a bad risk (ibid. …

Identifying the source of dynamics in disaggregated import data

This paper uses Kennan's (1988) model to separately identify supply-side and demand-side dynamics in US import data. Dynamics arise from both autocorrelated shocks to supply- and demand-side fundamentals, and from lagged adjustment to these shocks. The model consists of a pair of partial adjustment models in which consumers and producers each attempt to follow a stochastic target level of imports subject to a quadratic adjustment cost. The model is applied to quarterly data on US imports of seven narrowly defined commodities: Autos, Beer, Cameras, Wine, Cigars, Tea, and Soap. Two main results emerge. First, adjustment costs are important on both sides of the market. Second, supply-side adjustment costs are larger than demand-side adjustment costs. © 1998 John Wiley & Sons, Ltd.

Supply-side and demand-side cost sharing in health care.

In health markets, the price paid by insured consumers when health care services are demanded can be set separately from the price paid to providers when services are supplied. This fact suggests two alternate strategies for controlling the costs of health care: demand-side cost sharing, where patients must pay more in co-payments or deductibles, and supply-side cost sharing, which seeks to alter the incentives of health care workers to provide certain services. We review the rationale, limits, and comparative advantage of demand- and supply-side cost sharing in health care while primarily focusing on the short-run pursuit of consumer financial risk protection and efficiency. We then turn briefly to the long-run issue of technology adoption, as well as the how supply- and demand-side cost sharing may affect the fairness of the health system.

Optimal payment systems for health services

Demand-side cost sharing and the supply-side reimbursement system provide two separate instruments that can be used to influence the quantity of health services consumed. For risk-averse consumers, optimal payment systems — pairs of insurance and reimbursement plans — are characterized by conflict rather than consensus between patient and provider about the quantity of treatment. A model of conflict resolution based on bargaining theory is used to represent the outcome when the payment system creates divergences between desired demand and desired supply. Using that model, we describe the optimal combination of insurance and reimbursement systems that maximize consumer welfare.

How to survive in the private practice of psychiatry.

The private practice of psychiatry is being transformed by the new economics of medical care. Patients are paying more out-of-pocket for necessary care (demand-side cost sharing), and health care providers are being asked to assume part of the risk of treatment through prospective payment (supply-side cost sharing). Specific survival strategies for psychiatrists in private practice include development of a balanced practice, expansion of referral networks, participation in alternative delivery systems such as health maintenance organizations and preferred provider organizations, active involvement in utilization and claims review, participation in outcome studies, and expansion of patient care advocacy and community involvement.