Healthcare, Instability Risk and Cost Increases

In this paper we examine conditions under which instability risk and sustained labour cost increases can arise in a healthcare system that seeks to combine public sector healthcare provision that is free at the point of delivery with the availability of elective private healthcare at a positive user price. A key role is played by potential labour market shortages for public sector providers in impacting on their quality of healthcare, and by the density function of consumers’ net income to finance alternative private healthcare. Variables and parameters which influence the tipping point between stable and unstable outcomes can then be identified. The extent to which macro-economic increases in the rate of economic growth in the wider economy can overcome potential difficulties will also be examined.