Health outcome and higher medical qualifications: an economic conception and notes on implementation

A major policy issue in the health sector is the relationship between the outcomes of a medical procedure provided by differently qualified medical personnel, and in which the medical service supplied by the different groups of providers are differently priced. This problem, which exists in health systems which have providers' remuneration based on either fee-for-service or salaries, has not been explicitly considered by economists. Although this question has been indirectly treated in the economic literature on occupational regulation, and directly in the medical literature on quality assessment, both literatures are deficient in different respects. This paper applies the characteristics theory of consumer demand to the problem. A procedure for establishing the nature of the relationship between levels of qualifications and health outcome in an illustrative case of discrete choice is outlined. It is emphasised that the nature of this relationship must be established empirically. It is shown that in this illustrative situation there are four distinct cases that can arise and that under certain circumstances the analysis of the problem can be appropriately conducted in terms of a single dimension of health status. Different prices for the medical service are introduced and the conditions under which a higher price for a service provided by a medical practitioner with higher qualifications can be justified in terms of consumer welfare are considered. The paper concludes with a discussion of some issues associated with an empirical application of the conceptual framework.