Public Health Care with Waiting Time Revisited

Abstract

In this model we use delay as a tool to improve income redistribution. Delay makes people with the highest opportunity cost of waiting leave the public health care market. If these, as we assume, are the ones at the higher end of the income distribution, they are made to pay twice for health care: they contribute through income tax, but they address their demand to the private health care system and pay for the care they receive. In this way public and private provision of health care is made mutually consistent within a utility-based approach. Our model extends the results obtained by Hoel and Saeter (2003) to a more general approach and shows that delay may be an optimal tool in the presence of distortionary taxation. However, delay might not always be welfare-improving, even when utility is linear and taxation non-distortionary. We show that this statement applies to the model proposed by HS as well, unless the specific normalisation proposed by the authors is used.