Public provision and cross-border health care

David Granlund () and Magnus Wikström ()
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David Granlund: Department of Economics, Umeå School of Business and Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Magnus Wikström: Department of Economics, Umeå School of Business and Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 867, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: We study how the optimal public provision of health care depends on whether or not individuals have an option to seek publicly financed treatment in other regions. We find that, relative to the first-best solution, the government has an incentive to over-provide health care to low-income individuals. When cross-border health care takes place, this incentive is solely explained by that over-provision facilitates redistribution. The reason why more health care facilitates redistribution is that high-ability individuals mimicking low-ability individuals benefit the least from health care when health and labor supply are complements. Without cross-border health care, higher demand for health care among high-income individuals also contributes to the over-provision given that high-income individuals do not work considerably less than low-income individuals and that the government cannot discriminate between the income groups by giving them different access to health care.

Keywords: Health expenditure; Income redistribution; Patient mobility; Public Provision; Waiting time (search for similar items in EconPapers)
JEL-codes: H42 H51 I11 I18 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-10-16
New Economics Papers: this item is included in nep-hea, nep-nps, nep-pbe and nep-pub
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