The Financing of Public Hospitals: An Analysis of the Alternatives for Argentina

Abstract

After presenting an overview of the Argentine health care system including the most important features of its development over the past few years, the study realizes a theoretical review of the different resource transferring mechanisms that link the public sector with its own hospitals, and of the incentives these mechanisms generate. Under a fixed budget system, together with a program of fixed payments to staff, in which available resources do not depend on hospital income, incentives toward greater effort and efficiency are either few or non existent. The main conclusions of the study are drawn from an agency model in which the government (as principal) must design both the funds transfer mechanism to the hospital (as agent), as well as the payments system to its staff.