The Borders of Solidarity: How Countries Determine the Public/Private Mix in Spending and the Impact on Health Care

Posted: 21 Oct 2002

See all articles by Colleen M. Flood

Colleen M. Flood

University of Ottawa - Faculty of Law

Mark Stabile

INSEAD; National Bureau of Economic Research (NBER)

Carolyn Hughes Tuohy

University of Toronto - Department of Political Science

Abstract

In this paper we outline the mix of public/private funding in six OECD countries: Australia, Canada, the Netherlands, New Zealand, the UK, and the US. We look at the processes by which this mix is determined and the impact of the mix on health outcomes, utilization, spending, and waiting times.

In the absence of rationing by price or ability to pay rationing can occur implicitly through limitations on the capacity of the system (the number of beds, providers, technology etc) or explicitly (through limitations on the kinds of services publicly funded). In all of the countries there has historically been little attempt to develop a principled basis for determining the boundaries of the publicly funded system, and most of the systems under study have relied on negotiations between government and physician bargaining associations to determine what services will be publicly funded. We conclude that countries like Canada should establish principled processes for determining what is to be publicly funded.

Turning to the evidence on the impact of the public/private mix on health outcomes, utilization, spending, and waiting times, the evidence generally points away from increased private financing as a means to achieve effective health care reform. There appears to be no relationship between increased private spending and improved health outcomes. In fact, we found a positive correlation between private health care spending as a percent of total health spending and potential years of life lost. This result has to be read with some caution as it is only a simple correlation at a point in time. However, one could hypothesize that this result reflects in part that private spending tends to be skewed towards the more well off individuals where the returns to spending on health are smaller and away from potentially more needy populations where the returns are larger. Country specific evidence on the effects of private, out of pocket cost sharing on access to care and health outcomes shows that co-payments do indeed create barriers to access and that these barriers can result in worse health outcomes for the poor. The evidence on the relationship between private financing and health care spending suggests that countries with higher levels of private financing such as the US have higher costs and higher cost growth than countries with predominantly public payers such as Canada. Furthermore, examining the impact of private financing on public health funding suggests that increases in private financing are associated with declines, over time, in public funds allocated to health care. Finally, the available evidence does not suggest that private financing is successful in improving waiting times for care. In fact, even in those countries, such as the UK, with a second private health care tier, public initiatives to improve waiting times in the primary tier have proven more successful.

Suggested Citation

Flood, Colleen M. and Stabile, Mark and Tuohy, Carolyn Hughes, The Borders of Solidarity: How Countries Determine the Public/Private Mix in Spending and the Impact on Health Care. Available at SSRN: https://ssrn.com/abstract=308102

Colleen M. Flood (Contact Author)

University of Ottawa - Faculty of Law ( email )

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Mark Stabile

INSEAD ( email )

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National Bureau of Economic Research (NBER)

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Carolyn Hughes Tuohy

University of Toronto - Department of Political Science ( email )

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416-488-4071 (Fax)

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