Efficiency,access, and the mixed delivery of health care services

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.     

Saving the public from the private? Incentives and outcomes in dual practice

We consider a monopoly physician offering free public treatment and, if allowed, a private treatment for which patients have to pay out of pocket. While patients differ in the propensity to benefit from private treatment it always yields better health outcomes than public treatment but is also more costly in terms of money and time. We study the physician's supply of private care and allocation of time costs across public and private patients and contrast these with the first‐best allocation. To increase the willingness‐to‐pay for private treatment the physician shifts time costs to public patients. While this turns out to be socially optimal, the resulting positive network effect leads to an over‐provision of private care if time costs are sufficiently high. A second‐best allocation arises when the health authority sets public reimbursement but has no control over private provision. Depending on the welfare weight the health authority attaches to physician profits, a ban of dual practice may improve on the second‐best allocation. Notably, a ban benefits not only public patients but also private patients with a moderate propensity to benefit from private care.     

Market and public provision in the presence of human capital externalities

For many goods and services, such as health, education, legal services, police protection, the cost incurred by an individual supplier for providing quality is affected by the human capital of her colleagues. The paper shows that this human capital externality is crucial to determine whether such goods and services should be privately or publicly provided. Public and private provisions give individuals different incentives to acquire human capital, and the paper shows that either may be socially preferable, depending on the nature of the human capital externality: private provision of the final goods and services gives stronger incentives to human capital acquisition (and may therefore be socially preferable) if own human capital and one's colleagues' human capital are substitutes, and if suppliers with high human capital benefit more than suppliers with low human capital from their colleagues' human capital, but not excessively so.     

Toward ‘privatization’ of public sector output: decentralized contracting for public and private goods

Public sector goods and services can be produced in the private sector. The challenge is to provide incentives for allocative and technological efficiency. Either of two mechanisms is proposed to accomplish this. To ensure allocative efficiency, the proposed mechanisms require knowledge of the complete schedule of benefits. Alternatively, they can use information available on benefits in an efficient manner. Costs need not be known to authorities. Profit maximization leads to efficient private sector responses to cost changes over time. Either mechanism can be combined with the demand revealing process to circumvent the need for ex ante information on benefits.     

Tuition fees: User prices and private incentives

This paper studies the aggregate and distributional implications of introducing tuition fees for public education services into a tax system with income and consumption taxes. The setup is a neoclassical growth model where agents differ in capital holdings. We show that the introduction of tuition fees (a) improves individual incentives to work and/or save and (b) can be both efficient and equitable. The focus is on the role of tuition fees as an extra price and how this affects private incentives.     

‘Social enterprise spin-outs’: an institutional analysis of their emergence and potential

The recent phenomenon of public sector ‘social enterprise spin-outs’ is examined in order to critically assess their nature and innovative potential as providers of public services. The study utilises a theoretical model of institutional creation and change which incorporates key characteristics of ‘corporate spin-outs’ and ‘university spin-outs’ to facilitate the examination of their public sector counterparts, drawing on interview evidence from 30 newly-established social enterprise providers of health and care services in England. A main contribution of the paper is to provide a conceptual framework which sheds light on the strengths and potential vulnerabilities of social enterprise spin-outs as novel organisations that span the public, private and civil society sectors.     

Retirement and health services utilization in a low-income country*

We estimate the causal effects of retirement on health services utilization in Vietnam. Using authorized retirement ages as instruments for exogenous changes in retirement, we find positive and strong effects of retirement on outpatient health services in the public health sector. Retirement increases the probability of an outpatient visit by 51 percentage points for males and 36 percentage points for females, and the frequency of outpatient visits by 1.4 times for males and 2 times for females. However, we find no effect on the use of public inpatient services as well as private health services.     

Perceived quality of public services, liquidity constraints, and the demand of private specialist care

In this article we offer direct evidence on the role of perceived quality differences in publicly provided health care services, in determining the incentive to opt out for private services and, for poor individuals, short-run credit constraints in the access to these services. We concentrate on private specialist care, a category of services for which disparities in the access are highest. We use Bank of Italy—SHIW data to first study the determinants of demand for private and public specialist care, estimating probit and bivariate probit models, and ZIP models. We then apply the Carneiro–Heckman procedure to identify the share of people constrained and study how perceived quality of public services affects the percentage of people short run constrained. Our estimates suggest the presence of large territorial differences, as for the role of income and the quality of public services.     

Can a Mixed Health Care System be Desirable on Equity Grounds?*

Should health care provision be public, private, or both? We consider this question in a setting where people differ in their earnings capacity and face some illness risk. We assume that illness reduces an individual's time endowment when waiting for treatment. Treatment can be obtained in a competitive private sector (through private insurance) or in the National Health Service (NHS) where it is provided free of charge but after some (endogenous) waiting time. The equilibrium in the health care sector consists of a waiting time in the NHS such that no patient wants to switch health care provider. This equilibrium is governed by two public policies: the income tax system and the size of the NHS. We find that: (i) a mixed system with a small NHS is never desirable; (ii) actuarially fair sickness insurance is never desirable either; (iii) a mixed system with a sufficiently large NHS may improve on a pure public system if the dispersion of earnings capacities is large enough; and (iv) the welfare gains from such a mixed system are not likely to be significant.     

Managerial talent,motivation, and self-selection into public management

The quality of public management is a recurrent concern in many countries. Calls to attract the economy's best and brightest managers to the public sector abound. This paper studies self-selection into managerial positions in the public and private sector, using a model of a perfectly competitive economy where people differ in managerial ability and in public service motivation. We find that, if demand for public sector output is not too high, the equilibrium return to managerial ability is always higher in the private sector. As a result, relatively many of the more able managers self-select into the private sector. Since this outcome is efficient, our analysis implies that attracting a more able managerial workforce to the public sector by increasing remuneration to private-sector levels is not cost-efficient.     

A MODEL OF BUREAUCRACY AND CORRUPTION*

We analyze bureaucracy and corruption in a market with decentralized exchange and “lemons.” Exchange is modeled as a sequence of bilateral, random matches. Agents have private information about the quality of goods they produce and can supplement trade with socially inefficient bribes. Bureaucracy is modeled as a group of agents who enjoy centralized production and consumption. Transaction patterns between the bureaucracy and the private sector are fully endogenous. Centralized production and consumption in the bureaucracy give rise to low power incentives for the individual bureaucrats. As a result, private agents might bribe bureaucrats, whereas they do not bribe each other. An equilibrium with corruption and an equilibrium without corruption can coexist. We discuss some welfare implications of the model.     

University‐firm competition in basic research and university funding policy

We characterize equilibrium investments in basic research by the commercial and university sectors contingent on public funding of the university. We find that firms invest in basic research despite the opportunities for free riding and we present conditions under which firms even have incentives to augment the public funding to the university. We characterize the socially optimal volume of public funding for the university sector. Finally, we compare total investments in a mixed duopoly with those of duopolies composed of two universities as well as two profit‐maximizing firms.     

The Optimal Timing of Procurement Decisions and Patent Allocations*

In a patent race, social incentives and private incentives may sometimes coincide and at other times diverge – too many researchers remain in the race. If the social planner cannot determine what stage the researchers have achieved, this informational constraint can result in a socially suboptimal outcome. We construct a mechanism in which a planner exploits the researchers' private information to determine when and to whom to allocate rights to pursue the final prize. This mechanism does not require any payments and, therefore, will not distort earlier investment incentives. It is solvable by the iterative elimination of dominated strategies.     

Willingness‐to‐pay for parallel private health insurance: evidence from a laboratory experiment

Abstract Debate over the effects of public versus private health care finance persists in both academic and policy circles. This paper presents the results of a revealed preference laboratory experiment that tests how characteristics of the public health system affect a subject's willingness‐to‐pay (WTP) for parallel private health insurance. Consistent with the theoretical predictions of Cuff et al. (2010), subjects’ average WTP is lower and the size of the private insurance sector smaller when the public system allocates health care based on need rather than randomly and when the probability of receiving health care from the public system is high.     

Triangular Relations in Public Service Economics

This paper critically re-examines the restructuring of public services. Four main decision-making phases are identified: the public oversight to be guaranteed to socially sensitive economic activities; the ways of financing them; the economic organisation of the industry; and the production decisions. By focusing on organisation, the paper reinterprets the market structure in public service industries on the basis of the interactions among three main players: users/citizens, the government and the service supplier. It argues that the issue of public versus private ownership has been overemphasised, and that an effective increase in efficiency can be obtained by introducing appropriate incentives for both public and business players. Instead of using a single policy instrument, namely privatisation, public action ought to be informed by an array of organisational solutions.     

健康投资的产业结构效应:来自OECD等国家的宏观证据

在"未富先病"以及"健康中国"的背景下,文章从产业结构出发,通过使用世界银行数据库和佩恩表1995-2011年百余个国家的面板数据,研究了健康投资行业的发展对经济结构的影响,以期为当下中国转型经济结构的时代诉求提供参考.研究结果显示:首先,发展健康投资行业有助于增加服务业就业人口比重,并且私人健康投资对增加服务业就业人口比重的影响系数大于公共健康投资;其次,相对于公共健康投资,私人健康投资对第二产业增加值的挤出效应更有限;第三,发展健康服务业,尤其是公共健康事业将加快经济结构转型速度.综上所述,发展健康产业对推进产业结构转型具有积极意义,但如何在政策效果和可能的阻力之间进行权衡还需要政策制定者的慎重考虑.     

Competition and physician-enabled demand: The role of managed care

Recent organizational changes in the health care sector promote greater patient participation in their treatment decisions. How physicians respond to patient-initiated requests for treatment is an issue of considerable policy interest. To study this phenomenon, we introduce the notion of physician-enabled demand and examine empirically whether this behavior responds to competitive pressures in the market and financial incentives associated with different physician payment mechanisms.We find that physician-enabled demand increases with more competition under fee-for-service reimbursement, but decreases with greater competition under managed care. This asymmetric response is quite consistent with our conceptual framework and at odds with alternative interpretations.     

Public sector motivation and development failures

This paper provides a theoretical analysis of the relationship between public sector motivation and development. In the model the public sector produces a public good and workers are heterogeneous in terms of public sector motivation (PSM). Wages in the private sector increase with the quality of the public good. In this context, public sector wage premia (PSWP) have two opposite effects: low PSWP helps screen workers with PSM into the public sector, while high PSWP helps motivate workers to be honest. Raising PSWP may not improve the quality of governance and multiple equilibria might arise. The model highlights that the relative importance of workers selection and provision of ”on the job” incentives in the public sector varies in systematic ways with wages in the private sector. We provide anecdotal and original empirical evidence consistent with the theoretical predictions and discuss some policy implications for public sector reforms in developing countries.     

财政政策、货币政策与国外经济援助

本文通过把国外经济援助分成直接对私人的经济援助和直接对政府的经济援助来讨论这两类经济援助对政府财政政策和货币政策的影响。我们发现对私人的经济援助的增加可以使得私人消费水平和政府公共消费水平增加 ,但是它也导致政府收入税税率和通货膨胀率的提高 ;另一方面 ,对政府的经济援助增加可以使得均衡时的私人资本存量、私人消费水平和政府公共消费水平增加 ,同时可以使得均衡时的收入税税率和通货膨胀率下降。     

The Effect of Privatization on Public Transit Costs

In an effort to reduce operating deficits, increase productivity, and improve the quality of services, the public transit sector has been moving away from public ownership and operation and towards a franchising arrangement whereby a local government authorizes a private firm to manage and operate the city's public transit system. Profit maximization considerations imply that private managers have stronger incentives for cost efficiency. One such example is the city of Indianapolis which began privatization efforts in its transit operations in 1996. Based upon monthly data from January 1991 through March 1997, this study examines the effect of privatization on the city's cost of providing mass transit. The primary implication of the study is that Indianapolis has experienced an annual 2.5% reduction in operating costs since privatizing the management of its public transit system.