Public and Private Provision of Health Care

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 and the indemnity the patient obtains if patronizing 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 among other factors by the status of providers as in-plan or out-of-plan care providers. Also, we face 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.

A theoretical approach to dual practice regulations in the health sector

“…She also shows that the use of exclusive contracts can be a valuable regulatory measure when governments cannot design appropriate incen- 8 There are other papers in the health economics literature that have examined the interaction between public and private health care provision, but they do not consider job incentives of physicians working in both sectors. These include Barros and Martínez-Giralt (2002), which analyzes the effect of different reimbursement rules on quality and cost efficiency; Iversen (1997), which considers the effect of private health care provision on waiting lists in the public sector; Jofre-Bonet (2000), which studies the interaction between public and private providers when consumers differ in income; and Marchand and Schroyen (2005), which analyzes the desirability of mixed health care systems when distributional aspects matter. tive contracts.…”

Public versus private health care in a national health service

“…Still in most NHS systems there exists a parallell (and growing) private sector alongside the public one. 1 An important di¤erence, though, is that patients receive public health care for free (or at a low cost), while they typically are charged the full cost of the medical treatment when seeking private health care.…”

“…We analyse the interaction between the public and the private sector in a NHS, emphasising the direct links between the two sectors both on the demand side and the supply side. 3 1 In the UK, for instance, Propper (2000) reports that private health care expenditures have increased from 9% of total health care expenditures in 1979 to 15% in 1995. See e.g.…”

“…Besley and Gouveia (1994) for an overview of public and private health care in di¤erent countries. 2 Barros and Martinez-Giralt (2002) analyse the rivalry between preferred providers and out-of-plan providers under di¤erent reimbursement rules. Jofre-Bonet (2000) deals with the interaction between public and private providers when consumers di¤er in their income levels.…”

Altruism Heterogeneity and Quality Competition Among Healthcare Providers

“…Economides (1989), Economides (1993), Calem and Rizzo (1995), Lyon (1999), Gravelle and Masiero (2000), Barros and Martinez-Giralt (2002), assume that costs are separable in quality and quantity, i.e. quality is a public good for all patients.…”