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Public and private health‐care financing with alternate public rationing rules

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  • Katherine Cuff
  • Jeremiah Hurley
  • Stuart Mestelman
  • Andrew Muller
  • Robert Nuscheler

Abstract

We develop a model to analyze parallel public and private health‐care financing under two alternative public sector rationing rules: needs‐based rationing and random rationing. Individuals vary 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. Insurers (both public and private) must bid to obtain the necessary health‐care resources to treat their beneficiaries. Given individuals' willingnesses‐to‐pay for private insurance are increasing in income, the introduction of private insurance diverts treatment from relatively poor to relatively rich individuals. Further, the impact of introducing parallel private insurance depends on the rationing mechanism in the public sector. We show that the private health insurance market is smaller when the public sector rations according to need than when allocation is random. Copyright © 2010 John Wiley & Sons, Ltd.

Suggested Citation

  • Katherine Cuff & Jeremiah Hurley & Stuart Mestelman & Andrew Muller & Robert Nuscheler, 2012. "Public and private health‐care financing with alternate public rationing rules," Health Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 83-100, February.
    • Handle: RePEc:wly:hlthec:v:21:y:2012:i:2:p:83-100
    DOI: 10.1002/hec.1698
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    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. Xinyu Li & Christian Waibel, 2021. "Patients' free choice of physicians is not always good," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2751-2765, November.
    3. 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.
    4. Laura Levaggi & Rosella Levaggi, 2016. "Welfare analysis of rationing in health care provision," Working papers 39, Società Italiana di Economia Pubblica.
    5. Michael Kuhn & Robert Nuscheler, 2020. "Saving the public from the private? Incentives and outcomes in dual practice," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 1120-1150, August.
    6. Laura Levaggi & Rosella Levaggi, 2011. "Welfare properties of restrictions to health care based on cost effectiveness," Health Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 101-110, January.
    7. Laura Levaggi & Rosella Levaggi, 2017. "Rationing in health care provision: a welfare approach," International Journal of Health Economics and Management, Springer, vol. 17(2), pages 235-249, June.
    8. repec:dau:papers:123456789/5993 is not listed on IDEAS
    9. Mario Menegatti, 2014. "Optimal choice on prevention and cure: a new economic analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 363-372, May.

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    More about this item

    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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