Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina

The paper is concerned with the efficient organization of contractual relationships between health insurers and providers. An introduction to relevant aspects of contract theory is followed by their adaptation to the characteristics of the health care system. The focus lies on an ex ante alignment of incentive structures as well as on an efficient handling of conflicts of interest once a contract has been sealed (ex post). The theory based conclusions are contrasted with the situation in North Carolina, USA. Due to the implemented regulation, this state is well suited to serve as a reference. An excursus to the American health care system provides the reader with the necessary background. A discussion of results completes the paper.