DP8559 Patient Mobility, Health Care Quality and Welfare

Author(s): Kurt Richard Brekke, Rosella Levaggi, Luigi Siciliani, Odd Rune Straume
Publication Date: September 2011
Keyword(s): health care quality, patient mobility, regional and global welfare
JEL(s): H51, H73, I11, I18
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8559

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.