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Public and Private Provision of Health Care

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  • Martinez-Giralt, Xavier
  • Barros, Pedro

Abstract

One of the mechanisms that is implemented in the cost containment wave 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 co-payments patient must pay when using an out-of-plan care provider. We propose to study 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. Our main findings are that we can define a reimbursement scheme when decisions on prices and qualities are taken simultaneously (that we relate to primary health-care sectors) such that the first-best allocation is achieved. In contrast, some type of regulation is needed to achieve the optimal solution when decisions are sequential (specialized health-care sector). We also derive some normative conclusions on the way price controls should be implemented in some European Union Member States.

Suggested Citation

  • Martinez-Giralt, Xavier & Barros, Pedro, 2000. "Public and Private Provision of Health Care," CEPR Discussion Papers 2491, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2491
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    References listed on IDEAS

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    More about this item

    Keywords

    Mixed oligopoly; Health care;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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