Gaynor, M., Mehta, N. and Shubik, S.R.  <br/><br/>
Optimal contracting with altruistic agents: Medicare payments for dialysis drugs 

 - The American Economic Review  
 - 113(6), Jun, 2023: p.1530-1571 
<br/><br/> We study health-care provider agency and optimal payments, considering an expensive medication for dialysis patients. Using Medicare claims data we estimate a structural model of treatment decisions, in which providers differ in their altruism and marginal costs, and this heterogeneity is unobservable to the government. In a novel application of nonlinear pricing methods, we empirically characterize the optimal contracts in this environment. The optimal contracts eliminate medically excessive dosages and reduce expenditures, resulting in approximately $300 million in annual gains from better contracting. This approach could be applied to a broad class of problems in healthcare payment policy.- Reproduced