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Price vs. quantity in health insurance reimbursement

  • Francesca Barigozzi

    ()

While “integrated” systems regulate the quantity of health services, “Bismarckian” systems regulate their price. This paper compares the consumers’ allocations implemented within the two reimbursement systems. In the model, illness has a negative impact on labor productivity while public insurance is financed through income tax. Consumers have private information with respect to a parameter which can be interpreted as heterogeneity either in intensity of their preferences for treatment or in the type of illness. The social planner may be constrained to adopt uniform insurance plans, or may be free to choose self selecting plans. The analysis of uniform plans shows that Bismarckian systems dominate integrated systems from the social welfare point of view; whereas the opposite ranking holds with self-selecting plans. Copyright Springer Science+Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s10754-006-9001-8
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Article provided by Springer in its journal International Journal of Health Care Finance and Economics.

Volume (Year): 6 (2006)
Issue (Month): 3 (September)
Pages: 191-213

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Handle: RePEc:kap:ijhcfe:v:6:y:2006:i:3:p:191-213
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=106603

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  1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
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  6. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
  7. Blomqvist, Ake & Horn, Henrik, 1984. "Public health insurance and optimal income taxation," Journal of Public Economics, Elsevier, vol. 24(3), pages 353-371, August.
  8. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  9. Stiglitz, Joseph E., 1987. "Pareto efficient and optimal taxation and the new new welfare economics," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042 Elsevier.
  10. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty, Optimal Taxation and the Direct versus Indirect Tax Controversy," Economic Journal, Royal Economic Society, vol. 105(432), pages 1165-79, September.
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