Concerns for Equity and the Optimal Co-Payments for Publicly Provided Health Care



However, they gain from the tax reduction that is implied by the increase in
the co-payment.

For those who choose to be treated, it follows from (3) that

— (1 π)[-t,(p)]u'(y t) + At>(p) 1¼,(y t p)     (8)

op

In this expression, the first term is positive. We cannot unambiguously sign
the second term without knowing more about
t(p) than t'(p) < 0. However,
the concavity of
и implies that u'(y t)u'(y t p) when p is positive.
It therefore follows from (8) that

ev(y'f-p) < [-f(p) π]u'(y t p)
op

(9)


From (6) it follows that the LHS of (9) is negative for p sufficiently close to
0, and for
p sufficiently close to c. From (7) and (9) we therefore have the
following proposition:

Proposition 1 If the initial co-payment is sufficiently low, everyone chooses
to be treated, and a small increase in the co-payment will make everyone
worse off. If the initial co-payment is sufficiently close to the treatment cost
and some people choose to be untreated at this co-payment, those who have
chosen not to be treated gain from an increase in the co-payment, while those
who have chosen to be treated lose from an increase in the co-payment.

Figure 1 illustrates how v will depend on the size of the co-payment for
a typical person. If
p is so low that everyone chooses treatment (below p0 in
Figure 1), it follows from (6) that (8) can be rewritten as

°υ⅛,t,p) — (ι — ^[^(y t) u(y t p)] 0
op

(10)


if ω(p) — 1

where the inequality sign follows from the concavity of u. A positive co-
payment can thus only be optimal if it is set so high that it makes some
persons choose not to be treated.



More intriguing information

1. The effect of classroom diversity on tolerance and participation in England, Sweden and Germany
2. The effect of globalisation on industrial districts in Italy: evidence from the footwear sector
3. The name is absent
4. The name is absent
5. The name is absent
6. The name is absent
7. Restricted Export Flexibility and Risk Management with Options and Futures
8. The name is absent
9. Robust Econometrics
10. The name is absent