Public and private health-care financing with alternate public rationing rules
Article first published online: 9 DEC 2010
Copyright © 2010 John Wiley & Sons, Ltd.
Volume 21, Issue 2, pages 83–100, February 2012
How to Cite
Cuff, K., Hurley, J., Mestelman, S., Muller, A. and Nuscheler, R. (2012), Public and private health-care financing with alternate public rationing rules. Health Econ., 21: 83–100. doi: 10.1002/hec.1698
- Issue published online: 6 JAN 2012
- Article first published online: 9 DEC 2010
- Manuscript Accepted: 22 OCT 2010
- Manuscript Revised: 12 AUG 2010
- Manuscript Received: 21 MAY 2009
- health care financing;
- rationing rules
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.