Patient Mobility, Health Care Quality and Welfare

34 Pages Posted: 23 Sep 2011

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)

Rosella Levaggi

University of Brescia - Department of Economics and Management

Luigi Siciliani

University of York

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: August 15, 2011

Abstract

Patient mobility is a key issue in the EU who recently passed a new law on patients' right to EU-wide provider choice. In this paper we use a Hotelling model with two regions that differ in technology to study the impact of patient mobility on health care quality, health care financing and welfare. A decentralised solution without patient mobility leads to too low (high) quality and too few (many) patients being treated in the high-skill (low-skill) region. A centralised solution with patient mobility implements the first best, but the low-skill region would not be willing to transfer authority as its welfare is lower than without mobility. In a decentralised solution, the effects of patient mobility depend on the transfer payment. If the payment is below marginal cost, mobility leads to a 'race-to-the-bottom' in quality and lower welfare in both regions. If the payment is equal to marginal cost, quality and welfare remain unchanged in the high-skill region, but the low-skill region benefits. For a socially optimal payment, which is higher than marginal cost, quality levels in the two regions are closer to (but not at) the first best, but welfare is lower in the low-skill region. Thus, patient mobility can have adverse effects on quality provision and welfare unless an appropriate transfer payment scheme is implemented.

Keywords: Patient mobility, Health care quality, Regional and global welfare

JEL Classification: H51, H73, I 11, I18

Suggested Citation

Brekke, Kurt Richard and Levaggi, Rosella and Siciliani, Luigi and Straume, Odd Rune, Patient Mobility, Health Care Quality and Welfare (August 15, 2011). NHH Dept. of Economics Discussion Paper No. 13/2011, Available at SSRN: https://ssrn.com/abstract=1932147 or http://dx.doi.org/10.2139/ssrn.1932147

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

Rosella Levaggi

University of Brescia - Department of Economics and Management ( email )

Via San Faustino 74B
Brescia, 25122
Italy
+39 03 0298 8825 (Phone)
+39 03 0298 8837 (Fax)

HOME PAGE: http://www.eco.unibs.it/segdse/rlev/index.htm

Luigi Siciliani

University of York ( email )

Heslington
University of York
York, YO10 5DD
United Kingdom

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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