Public health care with waiting time: the role of supplementary private health care

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We consider an economy where most of the health care is publicly provided, and where there is waiting time for several types of treatments. Private health care without waiting time is an option for the patients in the public health queue. We show that although patients with low waiting costs will choose public treatment, they may be better off with waiting time than without. The reason is that waiting time induces patients with high waiting costs to choose private treatment, thus reducing the cost of public health care that everyone pays for. Even if higher quality (i.e. zero waiting time) can be achieved at no cost, the self-selection induced redistribution may imply that it is socially optimal to provide health care publicly and at an inferior quality level. We give a detailed discussion of the circumstances in which it is optimal to have waiting time for public health treatment. Moreover, we study the interaction between this quality decision and the optimal tax/subsidy on private health care. Terms of use: Documents inJEL Classification: H42, H51, I111, I118.

Public versus private health care in a national health service

“…We …nd it plausible to assume a convex disutility function: the longer a physician initially works, the greater disutility from a marginal labour increase. 12 In line with this, we let the marginal disutility be in ‡uenced by a physician's total amount of labour in public and private sector.…”

“…At stage one of the game, the HA sets w and r to maximise (5), anticipating the physicians' labour supply responses. In the competition case, these are given by (8) and (9), and in the coordination case they are given by (12) and (13). The equilibrium outcomes in the competition and coordination game are presented in Table A in Appendix A.…”

“…These patients can be considered as the waiting line, and the corresponding deadweigth loss may be interpreted as the waiting costs in the NHS system. There is, however, a reasonably large literature on waiting lists (see Cullis et al, 2000, for an overview), where some papers consider the interaction with the private sector, see e.g., Barros and Olivella (1999), Hoel and Saether (2003), Iversen (1997) and Olivella (2002). 7 This may explain the restrictions imposed on NHS physicians' private earings or time spent in the private sector we observe in some countries (see Johnson, 1995).…”

Competition and waiting times in hospital markets

“…Inserting (14) into the first-order condition, (10), and applying symmetry, the equilibrium waiting time in a market with regulated monopolies, w m , is given by 11…”

Are there better ways to determine wait times?

“…The case for nonzero wait times is based on the more efficient use of treatment capacity when the number of patients referred for treatment is random. 3 A hospital configured to perform a specific treatment at the rate of the average weekly number of referrals for this treatment (i.e., the steady-state rate) will find that from time to time, in the absence of a queue, treatment capacity exceeds referrals. Unless this excess treatment capacity (including associated pre-and posttreatment activities) can be redirected immediately and without cost to another treatment of equal benefit, an inefficiency cost is incurred when resources go unused, are temporarily redirected to a less valuable application, or are switched to a similarly valued application but at some cost.…”