Premium
Efficiency, access, and the mixed delivery of health care services
Author(s) -
Canta Chiara
Publication year - 2021
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12500
Subject(s) - incentive , constraint (computer aided design) , business , unit (ring theory) , public economics , health care , private good , finance , economics , microeconomics , public good , mechanical engineering , mathematics education , mathematics , engineering , economic growth
Universal health systems often rely on both pubic provision and contracting arrangements with private hospitals. This paper studies the optimal mix of public and private provision of health care services. We propose a model in which the regulator acts as athird‐party payer, and aims to ensure universal access to treatment at minimal cost. Patients need one unit of medical services and differ in the severity of illness. A private and a public hospital are available. Under incomplete contracts, ownership affects the regulatory constraints and the power of managerial incentives. Only the private manager internalizes profits, and has incentives to reject costly patients and to exert effort in cost reduction. Contracting with the private hospital is optimal when managerial effort is relatively effective in reducing costs. By using the public hospital as a last resort provider, the regulator can ensure access, provide incentives to the private manager, and internalize part of the resulting cost savings. Imposing a no‐dumping constraint on the private hospital reduces the power of incentives and is not always optimal.