Health Spending and Medical Innovation: A Theoretical Analysis

Toshitaka Fukiharu ()
Additional contact information
Toshitaka Fukiharu: Kansai University of International Studies

A chapter in Eurasian Economic Perspectives, 2021, pp 149-173 from Springer

Abstract: Abstract The aim of this paper is to explain an empirical fact by economic models. The fact is that there is a tendency for the share of health spending in GDP to rise. This paper asserts that the fact is partly due to medical innovation. The novelty of models is the explicit incorporation of hospital and doctors who treat patients, with the rise in the parameter of the illness treatment function defined as the medical innovation. Under the monopolistic case, the share always rises, while under the competitive case, it declines for the advanced medical society with a high parameter value; it rises for the basic medical society depending on the ratio between healthy and sick workers, and it rises for the backward medical society with a low parameter value. The theoretical ambiguity of assertion is partly removed by the empirical fact of the monopolistic tendency in the US medical sector. As by-products of this formulation, the emergence of moral hazard and adverse selection is discussed theoretically, where medical insurance—discount of sick workers’ medical fee—is procured as a subsidy from healthy workers to them. Moral hazard and adverse selection emerge depending on the parameters of the models.

Keywords: Adverse selection; General equilibrium; Health spending; Innovation; Moral hazard; Simulation (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:eurchp:978-3-030-63149-9_10

Ordering information: This item can be ordered from
http://www.springer.com/9783030631499

DOI: 10.1007/978-3-030-63149-9_10

Access Statistics for this chapter

More chapters in Eurasian Studies in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().