Title: Dynamic incentive remuneration design for functional recovery care

Authors: Masaru Unno; Hua Xu; Hiroaki Mukaidani

Addresses: Faculty of Management, Osaka Seikei University, 3-10-62, Aikawa, Higashiyodogawa, Osaka 533-0007, Japan ' Graduate School of Business Sciences, University of Tsukuba, 3-29-1, Otsuka, Bunkyo, Tokyo 112-0012, Japan ' Institute of Engineering, Hiroshima University, 1-4-1 Kagamiyama, Higashi-Hiroshima 739-8527, Japan

Abstract: This paper considers the dynamic incentive remuneration design for functional recovery care by applying dynamic principal-agent model, where the long-term care provider is formulated as the agent and the long-term care insurer as the principal. The insurer designs a dynamic incentive remuneration strategy to encourage the provider to provide functional recovery care. In particular, the insurer pays the remuneration to the provider based on the health improvement of the insured person at the end of a contract period. In addition, since it is possible that the cost incurred by the provider is not recoverable if less or excessive functional recovery care effort is made, an optimal functional recovery care effort level will be recommended to the provider.

Keywords: functional recovery care; dynamic principal-agent problem; incentive remuneration design; health insurance system.

DOI: 10.1504/AJMSA.2019.101419

Asian Journal of Management Science and Applications, 2019 Vol.4 No.1, pp.59 - 75

Available online: 01 Aug 2019 *

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