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Public And Private Provision Of Healtch Care

  • Pedro P. Barras
  • Xavier Martinez-Giralt

One of the mechanisms that are implemented in the cost containment movement in the health care sectors in western countries is the definition, by the third-party payer, of a set of preferred providers. The insured patients have different access rules to such providers when ill. The rules specify the copayments patients must pay when using an out-of-plan care provider. This paper studies the competitive process among providers in terms of both prices and qualities. Competition is influenced by the status of providers as in-plan or out-of-plan care providers. Also, there is a moral hazard of provider choice related to the trade-off between freedom to choose and the need to hold down costs. It is possible to achieve the first-best allocation by an appropriate definition of the reimbursement scheme when decisions on prices and qualities are taken simultaneously (as in primary health care sectors). In contrast, some type of regulation is needed to achieve the optimal solution when decisions are sequential (as in specialized health care sectors). We also derive normative conclusions on how price controls should be implemented in some European Union member states. Copyright (c) 2002 Massachusetts Institute of Technology.

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Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 438.99.

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Handle: RePEc:aub:autbar:438.99
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  1. Henriques, Irene, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 638-40, June.
  2. Xavier Martinez-Giralt & Pedro Pita Barros, 2000. "Selecting Negotiation Processes with Health Care," UFAE and IAE Working Papers 467.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  6. Asher Wolinsky, 1997. "Regulation of Duopoly: Managed Competition vs Regulated Monopolies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 821-847, December.
  7. Blomqvist, Ake & Johansson, Per-Olov, 1997. "Rejoinder to T.M. Selden," Journal of Public Economics, Elsevier, vol. 66(3), pages 525-526, December.
  8. Blomqvist, Ake & Johansson, Per-Olov, 1996. "Economic Efficiency and Mixed Public/Private Insurance," SSE/EFI Working Paper Series in Economics and Finance 110, Stockholm School of Economics.
  9. CREMER, Helmuth & MARCHAND, Maurice & THISSE, Jacques-François, . "Mixed oligopoly with differentiated products," CORE Discussion Papers RP 930, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Glazer, Jacob & Glazer, Jacob & McGuire, Thomas G., 1993. "Should physicians be permitted to 'balance bill' patients?," Journal of Health Economics, Elsevier, vol. 12(3), pages 239-258, October.
  11. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  12. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
  13. Selden, Thomas M., 1997. "More on the economic efficiency of mixed public/private insurance," Journal of Public Economics, Elsevier, vol. 66(3), pages 517-523, December.
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