The starting point of the debate aboutthe pros and cons of multipayer systems is the suspicionthat in many health care systems, consumers do not getsufficient value for money. This contribution argues thatone cause may be a non-optimal choice of payment systems.Optimal payment of health care providers importantly dependson the amount of information available to the (prospective)patient. If patients have full information about both theeffort exerted and the effectiveness of the serviceprovider, the conventional fee-for-service payment isoptimal from their point of view. If patients cannot observetrue effort exerted while providers are reasonablyhomogenous with respect to effectiveness, the optimalpayment function consists of a fixed payment and a bonus forespecially favorable outcomes in terms of health. If thepatient in addition does not know whether a given healthcare provider effective or ineffective, a specialinformational rent designed to attract the unrecognizedfavorable type is appropriate. Now, a government is unlikelyto come up with payment systems that closely conform to thisconditionality, typically preferring single-payer systemsthat allow service providers to exercise monopsony power andthus keep health care expenditure low. Multiple-payersystems containing competitive health insurers may have anadvantage in designing payment systems in a way thatmaintains or reinforces provider incentives to do the rightthing for their patients, resulting in more value for money.
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