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Public and Private Provision of Health Care

Pedro Barros () and Xavier Martinez-Giralt ()

No 2491, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: One of the mechanisms that is implemented in the cost containment wave in the health-care sectors in western countries is the definition, by the third-party payer, of a set of preferred providers. The insured patients have different access rules to such providers when ill. The rules specify the co-payments patient must pay when using an out-of-plan care provider. We propose to study the competitive process among providers in terms of both prices and qualities. Competition is influenced by the status of providers as in-plan or out-of-plan care providers. Also, there is a moral hazard of provider choice related to the trade-off between freedom to choose and the need to hold down costs. Our main findings are that we can define a reimbursement scheme when decisions on prices and qualities are taken simultaneously (that we relate to primary health-care sectors) such that the first-best allocation is achieved. In contrast, some type of regulation is needed to achieve the optimal solution when decisions are sequential (specialized health-care sector). We also derive some normative conclusions on the way price controls should be implemented in some European Union Member States.

Keywords: Health Care; Mixed Oligopoly (search for similar items in EconPapers)
JEL-codes: I11 I18 (search for similar items in EconPapers)
Date: 2000-06
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Journal Article: Public and Private Provision of Health Care (2002) Downloads
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