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Price vs. quantity in health insurance reimbursement

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  • Francesca Barigozzi

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Abstract

While “integrated” systems regulate the quantity of health services, “Bismarckian” systems regulate their price. This paper compares the consumers’ allocations implemented within the two reimbursement systems. In the model, illness has a negative impact on labor productivity while public insurance is financed through income tax. Consumers have private information with respect to a parameter which can be interpreted as heterogeneity either in intensity of their preferences for treatment or in the type of illness. The social planner may be constrained to adopt uniform insurance plans, or may be free to choose self selecting plans. The analysis of uniform plans shows that Bismarckian systems dominate integrated systems from the social welfare point of view; whereas the opposite ranking holds with self-selecting plans. Copyright Springer Science+Business Media, LLC 2006

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Bibliographic Info

Article provided by Springer in its journal International Journal of Health Care Finance and Economics.

Volume (Year): 6 (2006)
Issue (Month): 3 (September)
Pages: 191-213

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Handle: RePEc:kap:ijhcfe:v:6:y:2006:i:3:p:191-213

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Web page: http://www.springerlink.com/link.asp?id=106603

Related research

Keywords: Public health insurance; In-kind transfers; Reimbursement insurance; Adverse selection; I11; I18; D82; H42;

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References

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  1. 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.
  2. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  3. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
  4. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, Econometric Society, vol. 47(1), pages 61-73, January.
  5. Alger, Ingela & Albert Ma, Ching-to, 2003. "Moral hazard, insurance, and some collusion," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 225-247, February.
  6. Joseph E. Stiglitz, 1987. "Pareto Efficient and Optimal Taxation and the New New Welfare Economics," NBER Working Papers 2189, National Bureau of Economic Research, Inc.
  7. Blomqvist, Ake, 1997. "Optimal non-linear health insurance," Journal of Health Economics, Elsevier, vol. 16(3), pages 303-321, June.
  8. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
  9. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty, Optimal Taxation and the Direct versus Indirect Tax Controversy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(432), pages 1165-79, September.
  10. Blomqvist, Ake & Horn, Henrik, 1984. "Public health insurance and optimal income taxation," Journal of Public Economics, Elsevier, vol. 24(3), pages 353-371, August.
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