Concerns for Equity and the Optimal Co-Payments for Publicly Provided Health Care

24 Pages Posted: 13 Jan 2006  

Michael Hoel

University of Oslo; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: December 2005

Abstract

In countries where health care is publicly provided and where equity considerations play an important role in policy decisions, it is often argued that an increase in co-payments is unacceptable as it will be particularly harmful to the less well-off in society. The present paper derives socially optimal co-payments in a simple model of health care where people differ in income and in severity of illness. The social optimum depends on the welfare weights given to persons with different levels of expected utility. Increased concern for equity may increase optimal co-payments for illnesses with homogeneous severity across the population. For illnesses where the severity varies strongly across the population, optimal co-payments go down as a response to increased concern for equity, provided income differences in the society are sufficiently small.

Keywords: public health, co-payments, equity concerns

JEL Classification: D63, H42, H51, I18

Suggested Citation

Hoel, Michael, Concerns for Equity and the Optimal Co-Payments for Publicly Provided Health Care (December 2005). CESifo Working Paper Series No. 1620. Available at SSRN: https://ssrn.com/abstract=875569

Michael Hoel (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

University of Oslo ( email )

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N-0317 Oslo
Norway
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+ 47 22 85 50 35 (Fax)

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