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Public health care with waiting time: the role of supplementary private health care

  • Hoel, Michael
  • Saether, Erik Magnus

We consider an economy where most of the health care is publicly provided,and where there is waiting time for several types of treatments. Privatehealth care without waiting time is an option for the patients in the publichealth queue. We show that although patients with low waiting costs willchoose public treatment, they may be better off with waiting time thanwithout. The reason is that waiting time induces patients with high waitingcosts to choose private treatment, thus reducing the cost of public healthcare that everyone pays for. Even if higher quality (i.e. zero waiting time) canbe achieved at no cost, the self-selection induced redistribution may implythat it is socially optimal to provide health care publicly and at an inferiorquality level. We give a detailed discussion of the circumstances in which it isoptimal to have waiting time for public health treatment. Moreover, we studythe interaction between this quality decision and the optimal tax/subsidy onprivate health care.

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Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 22 (2003)
Issue (Month): 4 (July)
Pages: 599-616

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Handle: RePEc:eee:jhecon:v:22:y:2003:i:4:p:599-616
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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  1. Michael Hoel & Erik Magnus Sæther, 2001. "Public Health Care with Waiting Time: The Role of Supplementary Private Health Care," CESifo Working Paper Series 562, CESifo Group Munich.
  2. Alistair Munro, 1990. "Self-Selection and Optimal In-Kind Transfers," Working Papers Series 90/3, University of Stirling, Division of Economics.
  3. Hamilton, Barton H. & Hamilton, Vivian H. & Mayo, Nancy E., 1996. "What are the costs of queuing for hip fracture surgery in Canada?," Journal of Health Economics, Elsevier, vol. 15(2), pages 161-185, April.
  4. Sören Blomquist & Vidar Christiansen, . "Price Subsidies versus Public Provision," EPRU Working Paper Series 97-08, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
  6. Lindsay, Cotton M & Feigenbaum, Bernard, 1984. "Rationing by Waiting Lists," American Economic Review, American Economic Association, vol. 74(3), pages 404-17, June.
  7. Besley, T. & Coate, S., 1989. "Public Provision Of Private Goods And The Redistribution Of Income," Papers 36, Princeton, Woodrow Wilson School - Discussion Paper.
  8. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  9. 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.
  10. Robin W. Boadway & Maurice Marchand, 1990. "The Use of Public Expenditure for Distributive Purpose," Working Papers 796, Queen's University, Department of Economics.
  11. Sam Bucovetsky, 1984. "On the Use of Distributional Waits," Canadian Journal of Economics, Canadian Economics Association, vol. 17(4), pages 699-717, November.
  12. Cullis, John G. & Jones, Philip R., 1985. "National health service waiting lists : A discussion of competing explanations and a policy proposal," Journal of Health Economics, Elsevier, vol. 4(2), pages 119-135, June.
  13. Brekke, K.R. & Sorgard, L., 2000. "Where are all the Physicans? Private vs. Public Health Care," Norway; Department of Economics, University of Bergen 1800, Department of Economics, University of Bergen.
  14. Blomquist, Suren & Christiansen, Vidar, 1995. " Public Provision of Private Goods as a Redistributive Device in an Optimum Income Tax Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 547-67, December.
  15. Boadway, Robin & Marchand, Maurice & Sato, Motohiro, 1998. " Subsidies versus Public Provision of Private Goods as Instruments for Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 545-64, September.
  16. Hoel, Michael & Sæther, Erik Magnus, 2009. "Private health care as a supplement to a public health system with waiting time for treatment," HERO On line Working Paper Series 2000:9, Oslo University, Health Economics Research Programme.
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