ECONOMIC INCENTIVES IN THE CHOICE BETWEEN VAGINAL DELIVERY AND CESAREAN-SECTION

The dramatic rise in cesarean-section (C-section) rates, and their high costs and wide variation, has raised interest in understanding the factors affecting decisions to use this procedure. The economic incentives of physicians, hospitals, payers, and mothers are examined. In the economic framework, physicians must balance their short-term interests against their reputation, which is derived from efficiently providing what mothers want. Providers who encounter higher opportunity costs while attending to mothers in prolonged labor can reduce these costs by operating or by restructuring their practices. The mainly indirect evidence on financial incentives indicates that insured mothers have low marginal financial costs when they undergo C-section. Mothers with private, fee-for-service insurance have higher C-section rates than mothers who are covered by staff-model HMOs, who are uninsured, or who are publicly insured. In conclusion, research and payment reforms to reduce distortions to good practice are proposed.