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Ramsey Waits: Allocating Public Health Service Resources when there is Rationing by Waiting

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  • Hugh Gravelle
  • Luigi Siciliani

Abstract

The optimal allocation of a public health care budget across treatments must take account of the way in which care is rationed within treatments since this will affect their marginal value. We investigate the optimal allocation rules for health care systems where user charges are fixed and care is rationed by waiting. The optimal waiting time is higher for treatments with demands more elastic to waiting time, higher costs, lower charges, smaller marginal welfare loss from waiting by treated patients, and smaller marginal welfare losses from under-consumption of care. The results hold for a wide range of welfarist and non-welfarist objective functions and for systems in which there is also a private health care sector. They imply that allocation rules based purely on cost effectiveness ratios are suboptimal because they assume that there is no rationing within treatments.

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 07/15.

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Date of creation: Jun 2007
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Handle: RePEc:yor:yorken:07/15

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Web page: http://www.york.ac.uk/economics/
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Keywords: Waiting times; prioritisation; rationing; cost effectiveness ratios;

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References

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  1. Gravelle, Hugh & Dusheiko, Mark & Sutton, Matthew, 2002. "The demand for elective surgery in a public system: time and money prices in the UK National Health Service," Journal of Health Economics, Elsevier, vol. 21(3), pages 423-449, May.
  2. Hugh Gravelle & Peter Smith & Ana Xavier, 2003. "Performance signals in the public sector: the case of health care," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 81-103, January.
  3. Smith, Peter C., 2005. "User charges and priority setting in health care: balancing equity and efficiency," Journal of Health Economics, Elsevier, vol. 24(5), pages 1018-1029, September.
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  5. 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.
  6. Luigi Siciliani & Anderson Stanciole & Rowena Jacobs, 2008. "Do waiting times reduce hospital costs?," Discussion Papers 08/02, Department of Economics, University of York.
  7. Luigi Siciliani & Jeremy Hurst, 2003. "Explaining Waiting Times Variations for Elective Surgery Across OECD Countries," OECD Health Working Papers 7, OECD Publishing.
  8. Gravelle, Hugh & Siciliani, Luigi, 2008. "Optimal quality, waits and charges in health insurance," Journal of Health Economics, Elsevier, vol. 27(3), pages 663-674, May.
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  18. Hugh Gravelle & Luigi Siciliani, 2006. "Is Waiting-time Prioritisation Welfare Improving?," Discussion Papers 06/13, Department of Economics, University of York.
  19. Sandmo, Agnar, 1983. "Ex Post Welfare Economics and the Theory of Merit Goods," Economica, London School of Economics and Political Science, vol. 50(197), pages 19-33, February.
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  25. Garber, Alan M., 2000. "Advances in cost-effectiveness analysis of health interventions," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 4, pages 181-221 Elsevier.
  26. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-83, June.
  27. Martin, Stephen & Rice, Nigel & Jacobs, Rowena & Smith, Peter, 2007. "The market for elective surgery: Joint estimation of supply and demand," Journal of Health Economics, Elsevier, vol. 26(2), pages 263-285, March.
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  29. Hugh Gravelle & Luigi Siciliani, 2007. "Optimal Waits and Charges in Health Insurance," Discussion Papers 07/02, Department of Economics, University of York.
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Citations

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Cited by:
  1. Laudicella, M.; & Siciliani, L.; & Cookson, R.;, 2010. "Waiting Times and Socioeconomic Status: Evidence from England," Health, Econometrics and Data Group (HEDG) Working Papers 10/05, HEDG, c/o Department of Economics, University of York.
  2. Silviya Nikolova; & Arthur Sinko; & Matt Sutton;, 2012. "Do maximum waiting times guarantees change clinical priorities? A Conditional Density Estimation approach," Health, Econometrics and Data Group (HEDG) Working Papers 12/07, HEDG, c/o Department of Economics, University of York.
  3. Hugh Gravelle & Luigi Siciliani, 2009. "Third degree waiting time discrimination: optimal allocation of a public sector healthcare treatment under rationing by waiting," Health Economics, John Wiley & Sons, Ltd., vol. 18(8), pages 977-986.
  4. Januleviciute, Jurgita & Askildsen, Jan Erik & Holmås, Tor Helge & Kaarbøe, Oddvar & Sutton, Matt, 2010. "The Impact of Different Prioritisation Policies on Waiting Times: A Comparative Analysis of Norway and Scotland," Working Papers in Economics 07/10, University of Bergen, Department of Economics.
  5. Ching-to Albert MA & Simona Grassi, 2010. "Optimal public rationing and price response," Boston University - Department of Economics - Working Papers Series WP2010-024, Boston University - Department of Economics.
  6. Gravelle, Hugh & Siciliani, Luigi, 2008. "Optimal quality, waits and charges in health insurance," Journal of Health Economics, Elsevier, vol. 27(3), pages 663-674, May.

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