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HEALTH INSURANCE COVERAGE, INCOME DISTRIBUTION AND HEALTHCARE QUALITY IN LOCAL HEALTHCARE MARKETS

Authors

  • Damian S. Damianov,

    1. Department of Economics and Finance, University of Texas-Pan American, Edinburg, Texas, USA
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  • José A. Pagán

    Corresponding author
    1. Leonard Davis Institute of Health Economics, University of Pennsylvania, Philadelphia, Pennsylvania, USA
    • Department of Health Management and Policy, University of North Texas Health Science Center, Fort Worth, Texas, USA
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Correspondence to: Department of Health Management and Policy, University of North Texas Health Science Center, 3500 Camp Bowie Blvd, Fort Worth, Texas 76107, USA. E-mail: jose.pagan@unthsc.edu

ABSTRACT

We develop a theoretical model of a local healthcare system in which consumers, health insurance companies, and healthcare providers interact with each other in markets for health insurance and healthcare services. When income and health status are heterogeneous, and healthcare quality is associated with fixed costs, the market equilibrium level of healthcare quality will be underprovided. Thus, healthcare reform provisions and proposals to cover the uninsured can be interpreted as an attempt to correct this market failure. We illustrate with a numerical example that if consumers at the local level clearly understand the linkages between health insurance coverage and the quality of local healthcare services, health insurance coverage proposals are more likely to enjoy public support. Copyright © 2012 John Wiley & Sons, Ltd.

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