Public Versus Private Health Care in a National Health Service

41 Pages Posted: 31 Mar 2006

See all articles by Kurt Richard Brekke

Kurt Richard Brekke

Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Lars Sorgard

Norwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics

Date Written: March 2006

Abstract

This paper studies the interaction between public and private health care provision in a National Health Service (NHS), with free public care and costly private care. The health authority decides whether or not to allow private provision and sets the public sector remuneration. The physicians allocate their time (effort) in the public and (if allowed) in the private sector based on the public wage income and the private sector profits. We show that allowing physician dual practice crowds out public provision, and results in lower overall health care provision. While the health authority can mitigate this effect by offering a higher wage, we find that a ban on dual practice is more efficient if private sector competition is weak and public and private care are sufficiently close substitutes. On the other hand, if private sector competition is sufficiently hard, a mixed system, with physician dual practice, is always preferable to a pure NHS system.

Keywords: health care, mixed oligopoly, physician dual practice

JEL Classification: I11, I18, J42, L33

Suggested Citation

Brekke, Kurt Richard and Sorgard, Lars, Public Versus Private Health Care in a National Health Service (March 2006). CESifo Working Paper Series No. 1679. Available at SSRN: https://ssrn.com/abstract=894201

Kurt Richard Brekke (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Lars Sorgard

Norwegian School of Economics and Business Administration (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 5 595 9723 (Phone)
+47 5 595 9543 (Fax)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

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