Mixed provision of health care services with double coverage

This paper studies the effect of two alternative regulations of a health care market characterized by mixed provision. Health care is considered as a bundle of mild and severe illness treatments. A free national health service (NHS) offering universal coverage and preferred for severe illnesses treatments, but congested for mild ones, competes with a private health service which is not congested and preferred for mild illnesses care. Either an exclusive subscription regulation, where users are forced to demand health care from only one service; or a non-exclusive subscription regulation that allows choosing for each kind of illness a different health service can be implemented. The move from an exclusive to a non-exclusive regulation implies some users shifting to the private provider for mild illnesses only. This leads to an overall reduction of congestion in the NHS that always benefits users and leads to a less costly NHS under some conditions. Under the latter regulation the private service specializes in mild illnesses with higher profits, while all severe cases are treated by the NHS. Finally, social welfare is also higher under the non-exclusive regulation, even assuming a positive social cost of raising funds to cover the public health care, if such inefficiency is moderate or the NHS is less costly.