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Is where induced self insurance prevails but she is

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wGUL2= UH2(wB0,wG0)wG0UL1<UHR2wG2w2w1w1slope = – pL/(1 – pLslope = – pH/(1 – pH450D2/CP2R2wB0wB2w1wG0wBFigure 4.6Ex ante moral hazard and incomplete coverage1))
12.Consider the figure below where, under a public insurance system, D0is the marginalbenefit function for procedures q and S0is the initial capacity of the system.(a)What is XD0? (1)(b)Does a parallel private system emerge just because private healthcare insurance exists? If itdoes, what happens to the service delivery in the public insurance system? (2)(c)Explain how and whether the mixed system could be a Pareto improvement. (2)
Answers(a)XD0is the chronic excess demand under public insurance systems where taxpayer/citizens’willingness to pay less than what they would demand of healthcare services generates it. k0is the system capacity as chosen by the median-voter whereas q0is what is demandedunder free-at-the-point-of-service healthcare (or nearly free). (1)(b)For a parallel private system to emerge existence of private healthcare insurance is notsufficient because insurance has to be taken up by sufficient numbers of people to sustainthe private sector. If it does, the service delivery in the public insurance system may fall inthe short run with the exodus of especially human resources towards the private sector butdepends on what happens to human resources in the long run. If wages and salaries are notdriven up significantly, k0will prevail in the long run. (2)(c)The potential for a mixed system to induce a Pareto improvement derives from two factors:(i) Demand for the public sector will surely shift to D1and system capacity may likely returnto k0. Thus waits will be shorter in the public insurance system. Given that high-incomes exitthe public insurance system voluntarily (if they indeed do), nobody is worse off but actuallysome will be strictly better off. Thus a Pareto improvement. (2)13.Compare two existing healthcare systems other than Canada’s, one Beveridgean and oneBismarckian.pGD0S1S0D1EPMBApG0k1k0q1q0qXD0XD1
(a)Draw their structural design and connect their decision nodes (or boxes). (1)(b)Briefly explain the insurance properties (i.e. public, private but regulated or a mix). (2)(c)Briefly explain the healthcare services provision (i.e. payments to doctors and hospitals,how they are connected with incentives and associated risks). (2)AnswersThis question depends on pair of countries chosen. Just consult my lecture slides.
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