Public and private health‐care financing with alternate public rationing rules
AbstractWe develop a model to analyze alternative health care financing arrangements. Health care is demanded by individuals varying in income and severity of illness. There is a limited supply of health care resources used to treat individuals, causing some individuals to go untreated. We examine outcomes under full public finance, full private finance, and mixed, parallel public and private finance under two rationing rules for the public sector: needs-based rationing and random rationing. Insurers (both public and private) must bid to obtain the necessary health care resources to treat their beneficiaries. While public insurer's ability-to-pay is limited by its (fixed) budget; the private insurers willingness-to-pay reflects the individuals' willingness-to-pay for care. When permitted, the private sector supplies supplementary health care to those willing and able to pay. We find that the introduction of a private sector diverts treatment from relatively poor to relatively rich individuals. Moreover, if the public system allocates care according to need, then the average severity of the untreated is higher in a mixed system than in a pure public system. While we can unambiguously sign most comparative static effects for a general set of distribution functions, an analysis of the relationship between public sector rationing and the scope for a private health insurance market requires distributional assumptions. For a bivariate uniform distribution function we find that the private health insurance market is smaller when the public sector rations according to need as compared to random allocation of health care.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Health Economics.
Volume (Year): 21 (2012)
Issue (Month): 2 (02)
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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749
Other versions of this item:
- Katherine Cuff & Jeremiah Hurley & Stuart Mestelman & Andrew Muller & Robert Nuscheler, 2007. "Public and Private Health Care Financing with Alternate Public Rationing Rules," Centre for Health Economics and Policy Analysis Working Paper Series 2007-07, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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- Mario Menegatti, 2014. "Optimal choice on prevention and cure: a new economic analysis," The European Journal of Health Economics, Springer, vol. 15(4), pages 363-372, May.
- Neil J. Buckley & Katherine Cuff & Jeremiah Hurley & Logan McLeod & Stuart Mestelman & David Cameron, 2012.
"An Experimental Investigation of Mixed Systems of Public and Private Health Care Finance,"
Department of Economics Working Papers
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- Buckley, Neil J. & Cuff, Katherine & Hurley, Jeremiah & McLeod, Logan & Mestelman, Stuart & Cameron, David, 2012. "An experimental investigation of mixed systems of public and private health care finance," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 713-729.
- D. Fabbri & C. Monfardini, 2011.
"Opt Out Or Top Up? Voluntary Healthcare Insurance And The Public Vs. Private Substitution,"
wp780, Dipartimento Scienze Economiche, Universita' di Bologna.
- Fabbri, Daniele & Monfardini, Chiara, 2011. "Opt Out or Top Up? Voluntary Healthcare Insurance and the Public vs. Private Substitution," IZA Discussion Papers 5952, Institute for the Study of Labor (IZA).
- D. Fabbri ; & C. Monfardini ;, 2011. "Opt Out Or Top Up? Voluntary Healthcare Insurance And The Public Vs. Private Substitution," Health, Econometrics and Data Group (HEDG) Working Papers 11/28, HEDG, c/o Department of Economics, University of York.
- Kuhn, Michael & Nuscheler, Robert, 2013. "Saving the public from the private? Incentives and outcomes in dual practice," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 02/2013, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
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