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Ramsey waits: Allocating public health service resources when there is rationing by waiting

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Author Info
Gravelle, Hugh
Siciliani, Luigi

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Abstract

The optimal allocation of a public health care budget across treatments must take account of the way in which care is rationed within treatments since this will affect their marginal value. We investigate the optimal allocation rules for public health care systems where user charges are fixed and care is rationed by waiting. The optimal waiting time is higher for treatments with demands more elastic to waiting time, higher costs, lower charges, smaller marginal welfare loss from waiting by treated patients, and smaller marginal welfare losses from under-consumption of care. The results hold for a wide range of welfarist and non-welfarist objective functions and for systems in which there is also a private health care sector. They imply that allocation rules based purely on cost effectiveness ratios are suboptimal because they assume that there is no rationing within treatments.

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Publisher Info
Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 27 (2008)
Issue (Month): 5 (September)
Pages: 1143-1154
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Handle: RePEc:eee:jhecon:v:27:y:2008:i:5:p:1143-1154

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Web page: http://www.elsevier.com/locate/inca/505560

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hugh Gravelle & Peter Smith & Ana Xavier, 2003. "Performance signals in the public sector: the case of health care," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 81-103, January.
  2. Besley, Timothy J., 1988. "Optimal reimbursement health insurance and the theory of Ramsey taxation," Journal of Health Economics, Elsevier, vol. 7(4), pages 321-336, December. [Downloadable!] (restricted)
  3. Mark V. Pauly & Fredric E. Blavin, 2007. "Value Based Cost Sharing Meets the Theory of Moral Hazard: Medical Effectiveness in Insurance Benefits Design," NBER Working Papers 13044, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Sandmo, Agnar, 1983. "Ex Post Welfare Economics and the Theory of Merit Goods," Economica, London School of Economics and Political Science, vol. 50(197), pages 19-33, February. [Downloadable!] (restricted)
  5. Hoel, Michael & Saether, Erik Magnus, 2003. "Public health care with waiting time: the role of supplementary private health care," Journal of Health Economics, Elsevier, vol. 22(4), pages 599-616, July. [Downloadable!] (restricted)
  6. Luigi Siciliani & Jeremy Hurst, 2003. "Explaining Waiting Times Variations for Elective Surgery Across OECD Countries," OECD Health Working Papers 7, OECD, Directorate for Employment, Labour and Social Affairs. [Downloadable!]
  7. Douglas Coyle & Martin J. Buxton & Bernie J. O'Brien, 2003. "Stratified cost-effectiveness analysis: a framework for establishing efficient limited use criteria," Health Economics, John Wiley & Sons, Ltd., vol. 12(5), pages 421-427. [Downloadable!]
  8. Culyer, A J, 1989. "The Normative Economics of Health Care Finance and Provision," Oxford Review of Economic Policy, Oxford University Press, vol. 5(1), pages 34-58, Spring.
  9. Martin, Stephen & Smith, Peter C., 1999. "Rationing by waiting lists: an empirical investigation," Journal of Public Economics, Elsevier, vol. 71(1), pages 141-164, January. [Downloadable!] (restricted)
  10. Lindsay, Cotton M & Feigenbaum, Bernard, 1984. "Rationing by Waiting Lists," American Economic Review, American Economic Association, vol. 74(3), pages 404-17, June. [Downloadable!] (restricted)
  11. Hoel, Michael, 2007. "What should (public) health insurance cover?," Journal of Health Economics, Elsevier, vol. 26(2), pages 251-262, March. [Downloadable!] (restricted)
  12. Hugh Gravelle & Luigi Siciliani, 2007. "Optimal Waits and Charges in Health Insurance," Discussion Papers 07/02, Department of Economics, University of York. [Downloadable!]
  13. Farnworth, Michael G., 2003. "A game theoretic model of the relationship between prices and waiting times," Journal of Health Economics, Elsevier, vol. 22(1), pages 47-60, January. [Downloadable!] (restricted)
  14. repec:rus:hseeco:122140 is not listed on IDEAS
  15. Hugh Gravelle & Luigi Siciliani, 2008. "Is waiting-time prioritisation welfare improving?," Health Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 167-184. [Downloadable!]
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  1. Hugh Gravelle & Luigi Siciliani, 2009. "Third degree waiting time discrimination: optimal allocation of a public sector healthcare treatment under rationing by waiting," Health Economics, John Wiley & Sons, Ltd., vol. 18(8), pages 977-986. [Downloadable!]
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