IDEAS home Printed from https://ideas.repec.org/p/mcm/deptwp/2007-07.html
   My bibliography  Save this paper

Public and Private Health Care Financing with Alternate Public Rationing

Author

Listed:
  • Katherine Cuff
  • Jeremiath Hurley
  • Stuart Mestelman
  • Andrew Muller
  • Robert Nuscheler

Abstract

We develop a model to analyze health care nancing arrangements and under alternative public sector rationing rules. Health care is demanded by individuals varying in income and severity of illness. There is a limited supply of health care resources used to treat individuals, causing some individuals to go untreated. We examine outcomes under full public finance, full private finance, and mixed, parallel public and private finance under two rationing rules for the public sector: needs-based rationing and random rationing. Insurers (both public and private) must bid to obtain the necessary health care resources to treat their beneficiaries. While the public insurer's ability-to-pay is limited by its (fixed) budget, the private insurer's willingness-to-pay re ects the individuals' willingness-to-pay for care. When permitted, the private sector supplies supplementary health care to those willing and able to pay. The introduction of private insurance diverts treatment from relatively poor to relatively rich individuals. Moreover, if the public insurer allocates care according to need, the average severity of the untreated is higher in a mixed system than in a pure public system. While we can unambiguously sign most comparative static effects for a general set of distribution functions for income and severity, a complete analysis of the relationship between public sector rationing and the scope for a private health insurance market requires distributional assumptions. For a bivariate uniform distribution function we nd that the private health insurance market is smaller when the public sector rations according to need as compared to random allocation of health care.

Suggested Citation

  • Katherine Cuff & Jeremiath Hurley & Stuart Mestelman & Andrew Muller & Robert Nuscheler, 2007. "Public and Private Health Care Financing with Alternate Public Rationing," Department of Economics Working Papers 2007-07, McMaster University.
  • Handle: RePEc:mcm:deptwp:2007-07
    as

    Download full text from publisher

    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2007-07.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. Pedro Pita Barros & Pau Olivella, 2005. "Waiting Lists and Patient Selection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 623-646, September.
    3. 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.
    4. Katharina Hauck & Rebecca Shaw & Peter C. Smith, 2002. "Reducing avoidable inequalities in health: a new criterion for setting health care capitation payments," Health Economics, John Wiley & Sons, Ltd., vol. 11(8), pages 667-677.
    5. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    6. Gary Biglaiser & Ching-to Albert Ma, 2007. "Moonlighting: public service and private practice," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1113-1133, December.
    7. Olivella, Pau, 2003. "Shifting public-health-sector waiting lists to the private sector," European Journal of Political Economy, Elsevier, vol. 19(1), pages 103-132, March.
    8. Rizzo, John A. & Blumenthal, David, 1994. "Physician labor supply: Do income effects matter?," Journal of Health Economics, Elsevier, vol. 13(4), pages 433-453.
    9. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November.
    10. Hugh Gravelle & Luigi Siciliani, 2008. "Is waiting-time prioritisation welfare improving?," Health Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 167-184.
    11. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May.
    12. James Thornton & B. Kelly Eakin, 1997. "The Utility-Maximizing Self-Employed Physician," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 98-128.
    13. Kurt R. Brekke & Lars Sørgard, 2007. "Public versus private health care in a national health service," Health Economics, John Wiley & Sons, Ltd., vol. 16(6), pages 579-601.
    14. Culyer, A. J. & Wagstaff, Adam, 1993. "Equity and equality in health and health care," Journal of Health Economics, Elsevier, vol. 12(4), pages 431-457, December.
    15. Jasmin Kantarevic & Boris Kralj & Darrel Weinkauf, 2008. "Income effects and physician labour supply: evidence from the threshold system in Ontario," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1262-1284, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniele Fabbri & Chiara Monfardini, 2016. "Opt Out or Top Up? Voluntary Health Care Insurance and the Public vs. Private Substitution," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(1), pages 75-93, February.
    2. Buckley, Neil J. & Cuff, Katherine & Hurley, Jeremiah & McLeod, Logan & Mestelman, Stuart & Cameron, David, 2012. "An experimental investigation of mixed systems of public and private health care finance," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 713-729.

    More about this item

    Keywords

    health care financing; rationing rules;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcm:deptwp:2007-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/demcmca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.