Nova workboard

a blog from young economists at Nova SBE

A system of incentives

In life, there are some people that we need to trust. Our doctor is one of them. However, how do we know that our doctor has the same interests as us? After all, treating sick people is this medical practitioner’s job, and not something he or she does on a volunteer basis. One can argue that most doctors probably do their absolute best in saving as many lives as possible. I would like to believe in this argument. Still, I doubt that it would hurt with a system of incentives that gives the doctor and the patient the same interests.

Agency relationships occur when two or more parties have different and/or asymmetric information. Normally, this would make the person with the best information the decision maker. In other words, your doctor should make all the decisions concerning your health. But as mentioned above, my interest may not coincide with my doctor’s interests. Personally, I would like to get the best possible treatment for the lowest possible price. This is where the system of incentives may help.

In Norway we have something called “The arrangement of a regular GP”, where GP stands for General Practitioner. The purpose of this system is to allow everybody to sign up for a GP, and thereby improve the quality of general medical practice. So the purpose is good. The doctor’s gets a number of regular patients on its list and you get a regular doctor. Maybe by getting a personal relationship with your GP, the interest will be more alike? In theory you are also allowed to choose your GP. At the same time, for every person on a doctor’s list, the doctor is granted a relatively large sum of money from the government. Hopefully this money will give the GP an incentive to give the best possible health care and to protect the interests of the patient, since the most popular doctors get more patients on their lists and thereby more money from the government. Is it like this in real life? I don’t know. It can be very time consuming to change a regular GP when you want to, so I think many people just stick to their doctor almost no matter what. And if you want to switch, which doctor should you choose? The ones with many patients on their list? They are popular, yes, but do they have proper time for so many patients? Either way, as I mentioned before, the purpose of the arrangement is good. I doubt that it works perfect – not all doctors share the interests of their patients, but at least it’s a start towards a good system of incentives.

Solveig Lillebø