Multiple Pricing for Personal Assistance Services

This paper provides a general theoretical framework that captures the essential features ofa Swedish reform where private and public health care providers serve patients with certainfunctional impairments. Because providers receive a fixed hourly compensation for theirservices (identical across patient types) and only private providers can reject service requestsfrom patients, private providers avoid the costliest patients, resulting in a monetary deficitfor public providers. To partially overcome this problem, a multiple pricing (reimbursement)scheme is proposed and its solution is characterized. The results suggest that there are somefundamental trade-offs, e.g., between the goals of containing costs and restricting choicesfor patients, but that the suggested pricing scheme may substantially reduce the deficits forpublic providers without affecting the total budget set by the central government.