Patients' choice between the National Health Service and the private sector in the United Kingdom
Watson, Julia A.
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The aim of this dissertation is to explain how elective surgery patients choose between the public and private hospital sectors in the United Kingdom, and to analyze government policy changes which affect this choice. First the choice between the public and private sectors is modeled for the case where there is no private insurance available. The model takes into account the different rationing mechanisms used by National Health Service (NHS) and private hospitals to allocate surgery among patients. Private hospitals charge a price and ration on the basis of willingness to pay , while NHS hospitals , which face budget limits, ration on the basis of clinical need and require patients to wait for surgery. Consequently, a patient's choice of sector depends on her income and her level of clinical need. A simulation model is used to compare the efficiency and equity of two policy measures designed to raise the number of people receiving elective surgery : an increase in NHS funding and a subsidy to the price of private surgery. The subsidy is shown to be more efficient and the NHS funding increase more equitable. Within the same framework an expected utility model of the demand for private health insurance is developed. Two cases are analyzed: the case where individuals have no information about their future need for elective surgery and the case where they have partial information. In each case it is shown that for a given insurance premium there is a threshold level of income above which people buy insurance. It is also shown by simulation that in each case the insurance company can set a premium that allows it to break even. Finally the two models are combined. This enables the efficiency and equity of an increase in NHS funding, a subsidy to private care and a subsidy to private insurance to be compared in a situation where some private patients have insurance to cover the cost of their surgery. The NHS funding increase is shown to be most equitable , and depending on the definition of efficiency chosen, one of the two subsidies is most efficient.
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