Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 13/2011: Patient Mobility, Health Care Quality and Welfare.

Kurt R. Brekke (), Rosella Levaggi (), Luigi Siciliani () and Odd Rune Straume ()
Additional contact information
Kurt R. Brekke: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Rosella Levaggi: University of Brescia, Postal: Department of Economics, University of Brescia, Via San Faustino 74b, 25100 Brescia, Italy.
Luigi Siciliani: University of York, Postal: Department of Economics and Centre for Health Economics, University of York, Heslington, York YO10 5DD, UK
Odd Rune Straume: University of Minho, Postal: Department of Economics/NIPE, University of Minho, Campus de Gualtar, 4710-057 Braga, Portugal

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 bene…ts. For a socially optimal payment, which is higher than marginal cost, quality levels in the two regions are closer to (but not at) the …rst 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-codes: H51; H73; I11; I18

32 pages, September 22, 2011

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