Pau Olivella

Shifting public-health-sector waiting lists to the private sector

Abstract I analyze the public health administrations (PbHAs) decisions on waiting lists for public treatments. The PbHA maximizes a utilitarian social welfare function. Patients differ in their waiting costs, which in turn depend on patients severity. Patients choose between waiting for free treatment in the public sector and paying for immediate treatment in the private sector. I show that (1) the administrations incentives to reduce waiting lists are weakened by the presence of a private sector, and (2) that this effect is reinforced if private treatment fees are regulated, which implies that waiting time is longest in the latter case.

Multidimensional Screening in a Monopolistic Insurance Market: Proofs

This technical paper contains the proofs of all lemmata, propositions and other statements made in the paper Multidimensional screening in a monopolistic insurance market.

External referencing and pharmaceutical price negotiation

External referencing (ER) imposes a price cap for pharmaceuticals, based on prices of identical or comparable products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm, whereas a home country (H) can either negotiate prices independently or implement ER, based on the foreign price. We show that country H prefers ER if copayments in H are relatively high. This preference is reinforced when Hs population is small. Irrespective of relative country sizes, ER by country H harms country F. Our model is inspired by the wide European experience with this cost-containment policy. Namely, in Europe, drug authorization and price negotiations are carried out by separate agencies. We confirm our main results in two extensions. The first one allows for therapeutic competition between drugs. In the second one, drug authorization and price negotiation take place in a single agency.

Testing for Asymmetric Information in Private Health Insurance

We develop a test for adverse selection and use it to examine private health insurance markets. In contrast to earlier papers that consider a purely private system or a system in which private insurance supplements a public system, we focus our attention on a system where privately funded health care is substitutive of the publicly funded one. Using a model of competition among insurers, we generate predictions about the correlation between risk and the probability of taking private insurance under both symmetric information and adverse selection. These predictions constitute the basis for our adverse selection test. The theoretical model is also useful to conclude that the setting that we focus on is especially attractive to test for adverse selection. Using the British Household Panel Survey, we find evidence that adverse selection is present in this market.

Tax Amnesties in a Dynamic Model of Tax Evasion

We present a dynamic model of tax evasion, where tax liabilities last for two periods and the probability of an inspection decreases with the sum of taxes evaded this period plus taxes evaded last period. We show that a tax amnesty that pardons more than the evasion penalties (an extensive amnesty) can temporarily improve compliance. Whenever the inspection technology improves, steady state compliance also improves, but the economy takes time to transit from one steady state to the other. We show that an amnesty may accelerate this transit, or even make it instantaneous if the amnesty is extensive enough. Copyright 1999 by Blackwell Publishing Inc.

Reputational concerns with altruistic providers

We study a model of reputational concerns when doctors differ in their degree of altruism and they can signal their altruism by their (observable) quality. When reputational concerns are high, following the introduction or enhancement of public reporting, the less altruistic (bad) doctor mimics the more altruistic (good) doctor. Otherwise, either a separating or a semi-separating equilibrium arises: the bad doctor mimics the good doctor with probability less than one. Pay-for-performance incentive schemes are unlikely to induce crowding out, unless some dimensions of quality are unobservable. Under the pooling equilibrium a purchaser can implement the first-best quality by appropriately choosing a simple payment scheme with a fixed price per unit of quality provided. This is not the case under the separating equilibrium. Therefore, policies that enhance public reporting complement pay-for-performance schemes.

Markets in Health Care

This article offers a general overview of different ways in which market competition in the provision of health insurance and healthcare services have been introduced in different countries. The authors discuss (1) how does the market equilibrium come about when price is not the main instrument to allocate resources; (2) the advantages and pitfalls of the market mechanism in the presence of risk and information asymmetries; and (3) whether the regulator should set limits to decision making and choice. It is also meant to be a guide in these issues throughout the entire encyclopedia. A brief teachers guide is also offered.