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

Abstract

I analyze the public health administration's (PbHA's) 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 patient's 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 administration's 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.