Considering the effects of financial incentives and professional ethics on 'appropriate' medical care.

Robert Woodward, University of New Hampshire - Main Campus
F Warren-Boulton, U.S. Department of Justice, Washington, DC


This manuscript presents a model of an 'ethical' physician's allocation of time and income between work and leisure activities for various remuneration types and income levels. The physician is 'ethical' because, ceteris paribus, he prefers to provide that amount of medical care which he believes to be in the patient's best interests. Remuneration systems include fixed, time-based and output-based incomes. Only output-based income provides the physician with incentives which may (if the physician density and medical care price are sufficiently high) generate more-than-'appropriate' care per patient. Fixed and time-based incomes necessarily lead the physician to provide less-than-'appropriate' care.