Discontinuous system of allowances: the response of prosocial health-care professionals

Abstract

This paper examines the unintended strategic effects of non-linear incentives in public policies. A system of health care subsidies structured into discrete intervals may lead to strategic behaviour. We provide new evidence on this issue, focusing on a case where strategic actions are taken by healthcare providers (HCPs). We show that HCPs adjust the score of claimants in long-term care needs assessments, allowing claimants to access higher levels of care benefits. This adjustment does not bring any pecuniary gain for HCPs. In a quasi-natural experimental setting –the implementation of Spanish long-term care (LTC)– we show that the distribution of the claimants' needs includes kinks around the thresholds set for the LTC system. [...]