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Public versus Private Health Care in a National Health Service

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  • Kurt R. Brekke
  • Lars Sørgard

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 hard, a mixed system, with physician dual practice, is always preferable to a pure NHS system.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-03/cesifo1_wp1679.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1679.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1679

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Keywords: health care; mixed oligopoly; physician dual practice;

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References

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  1. Xavier Martinez-Giralt & Pedro Pita Barros, 2000. "Negotiation Advantages of Professional Associations in Health Care," UFAE and IAE Working Papers 466.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Cullis, John G. & Jones, Philip R. & Propper, Carol, 2000. "Waiting lists and medical treatment: Analysis and policies," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 23, pages 1201-1249 Elsevier.
  3. Pedro Pita Barros & Xavier Martinez-Giralt, 2002. "Public and Private Provision of Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 109-133, 03.
  4. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November.
  5. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
  6. Pau Olivella Cunill & Pedro Pita Barros, 2000. "Waiting Lists and Patient Selection," Econometric Society World Congress 2000 Contributed Papers 0283, Econometric Society.
  7. Iversen, Tor, 1997. "The effect of a private sector on the waiting time in a national health service," Journal of Health Economics, Elsevier, vol. 16(4), pages 381-396, August.
  8. Maurice March & Fred Schroyen, 2005. "Can a Mixed Health Care System be Desirable on Equity Grounds?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 1-23, 03.
  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, vol. 51(3), pages 197-213, May.
  10. Paula González, 2004. "Should physicians' dual practice be limited? An incentive approach," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 505-524.
  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, vol. 17(6), pages 701-728, December.
  12. Rickman, Neil & McGuire, Alistair, 1999. "Regulating Providers' Reimbursement in a Mixed Market for Health Care," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(1), pages 53-71, February.
  13. 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.
  14. Kurt R. Brekke, 2004. "Competition or Coordination in Hospital Markets with Unionised Labour," International Journal of Health Care Finance and Economics, Springer, vol. 4(1), pages 65-89, 03.
  15. Luigi Siciliani, 2005. "Does more choice reduce waiting times?," Health Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 17-23.
  16. Olivella, Pau, 2003. "Shifting public-health-sector waiting lists to the private sector," European Journal of Political Economy, Elsevier, vol. 19(1), pages 103-132, March.
  17. Jofre-Bonet, Mireia, 2000. "Health care: private and/or public provision," European Journal of Political Economy, Elsevier, vol. 16(3), pages 469-489, September.
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Citations

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Cited by:
  1. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2007. "Competition and Waiting Times in Hospital Markets," CESifo Working Paper Series 2124, CESifo Group Munich.
  2. Elin Johanna Gudrun Hafsteinsdottir & Luigi Siciliani, 2010. "DRG prospective payment systems: refine or not refine?," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1226-1239.
  3. 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.
  4. 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.
  5. Josse Delfgaauw, 2007. "Dedicated Doctors: Public and Private Provision of Health Care with Altruistic Physicians," Tinbergen Institute Discussion Papers 07-010/1, Tinbergen Institute, revised 17 Sep 2007.
  6. 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.
  7. Socha, Karolina Z. & Bech, Mickael, 2011. "Physician dual practice: A review of literature," Health Policy, Elsevier, vol. 102(1), pages 1-7, September.
  8. repec:dgr:uvatin:2007010 is not listed on IDEAS

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