Internalizing social value in healthcare: Optimal policy in mixed public-private systems

Erez Yerushalmi and Sani Ziv

Journal of Policy Modeling, 2025, vol. 47, issue 3, 512-536

Abstract: This paper examines the interplay between public and private healthcare in a system that internalizes non-marketed social value. We provide new estimates of the healthcare social value and highlight the importance of integrating it into national accounts for effective macroeconomic policy analysis. Traditional metrics often undervalue healthcare by neglecting these externalities, leading to a suboptimal allocation of healthcare services from a societal perspective. While both public and private healthcare generate social value, determining the optimal public-private mix is challenging because they do not necessarily produce the same type of value, and an unregulated mixed system can impose negative fiscal externalities on public provision. To address these issues, we develop a general equilibrium model with dual public-private healthcare services, calibrate the non-marketed social value, and simulate two market liberalization scenarios with optimal Pigouvian tax policies. A key finding with significant policy implications is that healthcare social value accounts for at least 28 % of public healthcare expenditure, or more.

Keywords: Social Value in Healthcare; Computable General Equilibrium; Israel; Public-Private Healthcare Mix; Pigouvian Tax; Regulation and Liberalization (search for similar items in EconPapers)
JEL-codes: D58 D62 I18 I31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:3:p:512-536

DOI: 10.1016/j.jpolmod.2025.01.007

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