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Public versus private health care in a national health service

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  • Kurt R. Brekke

    (Department of Economics, Health Economics Bergen (HEB), University of Bergen, Norway)

  • Lars S�rgard

    (Department of Economics, Norwegian School of Economics and Business Administration, Bergen, Norway)

Abstract

This paper studies the interaction between public and private health care provision in a National Health Service (NHS), with free public care and costly private care. The health authority decides whether or not to allow private provision and sets the public sector remuneration. The physicians allocate their time (effort) in the public and (if allowed) in the private sector based on the public wage income and the private sector profits. We show that allowing physician dual practice 'crowds out' public provision, and results in lower overall health care provision. While the health authority can mitigate this effect by offering a higher wage, we find that a ban on dual practice is more efficient if private sector competition is weak and public and private care are sufficiently close substitutes. On the other hand, if private sector competition is sufficiently tough, a mixed system, with physician dual practice, is always preferable to a pure NHS system. Copyright © 2006 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 16 (2007)
Issue (Month): 6 ()
Pages: 579-601

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Handle: RePEc:wly:hlthec:v:16:y:2007:i:6:p:579-601

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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References

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  1. Cullis, John G. & Jones, Philip R. & Propper, Carol, 2000. "Waiting lists and medical treatment: Analysis and policies," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 23, pages 1201-1249 Elsevier.
  2. Iversen, Tor, 1997. "The effect of a private sector on the waiting time in a national health service," Journal of Health Economics, Elsevier, Elsevier, vol. 16(4), pages 381-396, August.
  3. Pedro Pita Barros & Xavier Martinez-Giralt, 2002. "Public and Private Provision of Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 11(1), pages 109-133, 03.
  4. Pedro Pita Barros & Xavier Martinez-Giralt, 2003. "Negotiation Advantages of Professional Associations in Health Care," Working Papers 81, Barcelona Graduate School of Economics.
  5. Kurt R. Brekke, 2004. "Competition or Coordination in Hospital Markets with Unionised Labour," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 4(1), pages 65-89, 03.
  6. Pedro Pita Barros & Pau Olivella, 2005. "Waiting Lists and Patient Selection," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 14(3), pages 623-646, 09.
  7. Luigi Siciliani, 2005. "Does more choice reduce waiting times?," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(1), pages 17-23.
  8. Jofre-Bonet, Mireia, 2000. "Health care: private and/or public provision," European Journal of Political Economy, Elsevier, Elsevier, vol. 16(3), pages 469-489, September.
  9. Calem, Paul S. & Dor, Avi & Rizzo, John A., 1999. "The welfare effects of mergers in the hospital industry," Journal of Economics and Business, Elsevier, Elsevier, vol. 51(3), pages 197-213, May.
  10. Hoel, Michael & Saether, Erik Magnus, 2003. "Public health care with waiting time: the role of supplementary private health care," Journal of Health Economics, Elsevier, Elsevier, vol. 22(4), pages 599-616, July.
  11. Kesteloot, K. & Voet, N., 1998. "Incentives for cooperation in quality improvement among hospitals--the impact of the reimbursement system," Journal of Health Economics, Elsevier, Elsevier, vol. 17(6), pages 701-728, December.
  12. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, Elsevier, vol. 5(2), pages 129-151, June.
  13. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, Elsevier, vol. 19(6), pages 855-876, November.
  14. Rickman, Neil & McGuire, Alistair, 1999. "Regulating Providers' Reimbursement in a Mixed Market for Health Care," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 46(1), pages 53-71, February.
  15. Maurice March & Fred Schroyen, 2005. "Can a Mixed Health Care System be Desirable on Equity Grounds?," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 107(1), pages 1-23, 03.
  16. Olivella, Pau, 2003. "Shifting public-health-sector waiting lists to the private sector," European Journal of Political Economy, Elsevier, Elsevier, vol. 19(1), pages 103-132, March.
  17. Paula González, 2004. "Should physicians' dual practice be limited? An incentive approach," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(6), pages 505-524.
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Cited by:
  1. Brekke, Kurt Richard & Siciliani, Luigi & Straume, Odd Rune, 2007. "Competition and Waiting Times in Hospital Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6285, C.E.P.R. Discussion Papers.
  2. Socha, Karolina Z. & Bech, Mickael, 2011. "Physician dual practice: A review of literature," Health Policy, Elsevier, Elsevier, vol. 102(1), pages 1-7, September.
  3. Socha, Karolina, 2010. "Physician dual practice and the public health care provision. Review of the literature," COHERE Working Paper 2010:4, COHERE - Centre of Health Economics Research, University of Southern Denmark.
  4. Paula González & Inés Macho-Stadler, 2011. "A Theoretical Approach to Dual Practice Regulations in the Health Sector," Working Papers 11.01, Universidad Pablo de Olavide, Department of Economics.
  5. Josse Delfgaauw, 2007. "Dedicated Doctors: Public and Private Provision of Health Care with Altruistic Physicians," Tinbergen Institute Discussion Papers, Tinbergen Institute 07-010/1, Tinbergen Institute, revised 17 Sep 2007.
  6. Elin Johanna Gudrun Hafsteinsdottir & Luigi Siciliani, 2010. "DRG prospective payment systems: refine or not refine?," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(10), pages 1226-1239.
  7. Carine Milcent, 2014. "Coût des soins hospitaliers : effet de la concurrence par la qualité," PSE Working Papers halshs-01010327, HAL.
  8. Josse Delfgaauw, 2007. "Dedicated Doctors: Public and Private Provision of Health Care with Altruistic Physicians," Tinbergen Institute Discussion Papers, Tinbergen Institute 07-010/1, Tinbergen Institute, revised 17 Sep 2007.
  9. Socha, Karolina & Bech, Mickael, 2011. "The relationship between dual practice and physicians’ work behaviour in the public hospitals: Results from the Danish survey," COHERE Working Paper 2011:1, COHERE - Centre of Health Economics Research, University of Southern Denmark.

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