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Prices and protocols in public health care

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  • Hammer, Jeffrey S.

Abstract

The author tries to derive price and rationing rules for public health facilities. He highlights the effect on these rules of different assumptions about the objectives of government (health versus welfare), the limits of available policy instruments, and the market environment in which the public system operates. One recurrent finding: policy reform must be assessed in relation to the changes it induces relative to the status quo before reform. This point may seem obvious, but it represents a distinct gap in the literature on resource allocation in health. To assess changes, the behavior of the private sector must be known in the type of care given in a system and on how this care will change in response to the policy. Substituting for a reasonably well-functioning private sector is not as valuable as providing services that the private sector cannot be expected to sustain. Research is needed to characterize market equilibrium for medical care and its response to policy measures. The author could not examine many issues - most important, those related to uncertainty and insurance. But if the research he calls for in this paper is pursued, those issues must figure prominently as major determinants in the demand for care. This need was originally identified by Arrow, and there is still a long way to go. The author's analysis is not done in terms of preventive or curative care, and he argues for assessing interventions on the basis of changes in the stated objectives of a public system. But there could well be a connection with the preventive-curative dichotomy if there were reason to believe that preventive care will systematically lose out to curative care in a market setting. Onthe basis of people's generally acknowledged undervaluation of preventive services, this may well be the case. Other prevention activities also have many public good features, with few private alternatives, and will look good when improvements over stauts quo are examined for all interventions. But all activities must be evaluated in their improvement over market provision. It is not necessary to prejudge the case for certain types of intervention.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1131.

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Date of creation: 30 Apr 1993
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Handle: RePEc:wbk:wbrwps:1131

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Related research

Keywords: Economic Theory&Research; Health Monitoring&Evaluation; Health Economics&Finance; Health Systems Development&Reform; Environmental Economics&Policies;

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References

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  1. Feldstein, Martin S, 1972. "Distributional Equity and the Optimal Structure of Public Prices," American Economic Review, American Economic Association, vol. 62(1), pages 32-36, March.
  2. Selden, Thomas M., 1990. "A model of capitation," Journal of Health Economics, Elsevier, vol. 9(4), pages 397-409, December.
  3. Pauly, Mark V., 1988. "Market power, monopsony, and health insurance markets," Journal of Health Economics, Elsevier, vol. 7(2), pages 111-128, June.
  4. Robin Boadway, 1973. "Cost-Benefit Rules in General Equilibrium," Working Papers 137, Queen's University, Department of Economics.
  5. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989 Elsevier.
  6. Squire, Lyn, 1989. "Project evaluation in theory and practice," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 21, pages 1093-1137 Elsevier.
  7. 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.
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Citations

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Cited by:
  1. Berman, Peter A., 1998. "Rethinking health care systems: Private health care provision in India," World Development, Elsevier, vol. 26(8), pages 1463-1479, August.
  2. Hammer, Jeffrey S, 1997. "Economic Analysis for Health Projects," World Bank Research Observer, World Bank Group, vol. 12(1), pages 47-71, February.
  3. Gertler, Paul J. & Hammer, Jeffrey S., 1997. "Strategies for pricing publicly provided health services," Policy Research Working Paper Series 1762, The World Bank.
  4. Jimenez, Emmanuel & DEC, 1994. "Human and physical infrastructure : public investment and pricing policies in developing countries," Policy Research Working Paper Series 1281, The World Bank.

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