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Public and Private Provision of Health Care
Author(s) -
Barros Pedro Pita,
MartinezGiralt Xavier
Publication year - 2002
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2002.00109.x
Subject(s) - reimbursement , business , health care , normative , competition (biology) , public economics , moral hazard , process (computing) , actuarial science , set (abstract data type) , incentive , economics , microeconomics , economic growth , political science , ecology , programming language , computer science , biology , operating system , law
One of the mechanisms that are implemented in the cost containment movement 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 copayments patients must pay when using an out‐of‐plan care provider. This paper studies 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. It is possible to achieve the first‐best allocation by an appropriate definition of the reimbursement scheme when decisions on prices and qualities are taken simultaneously (as in primary health care sectors). In contrast, some type of regulation is needed to achieve the optimal solution when decisions are sequential (as in specialized health care sectors). We also derive normative conclusions on how price controls should be implemented in some European Union member states.