Intermunicipal health care consortia in Brazil: Strategic behavior, incentives and sustainability

This article studies strategic behavior in municipal health care consortia where neighboring municipalities form a partnership to supply high-complexity health care. Each municipality partially funds the organization. Depending on the partnership contract, a free rider problem may jeopardize the organization. A municipality will default its payments if:it can still benefit from the services, especially when political pressures for competing expenditure arise. The main result is that the partnership sustainability depends on punishment mechanisms to a defaulting member, the gains from joint provision of services and the overall economic environment. Possible solutions to the incentive problem are discussed. Copyright (c) 2006 John Wiley & Sons, Ltd.