Inputting the Social Value of Public Healthcare: a General Equilibrium Simulation of Israel
4 Cardigan Street Birmingham B4 7BD United Kingdom
Drop in - Room C420
CAFE Research Presentation
Our presentations usually fall on Wednesdays and feature a key piece of research from the CAFE research centre.
Lunch and networking: 13:30-14:00
Countries with universal healthcare have experienced a rising demand for healthcare services without a corresponding rise in public supply. This has led to a debate on whether to increase private healthcare services - especially in hospitals and second-tier healthcare.
Proponents for increasing private healthcare highlight gains in efficiency and innovation, while opponents emphasise its risk to social welfare. However, the monetary value of these gains and losses is seldom quantified. The aim of this paper is to impute the minimum social value of public healthcare that corresponds to indifference between gains in economic efficiency with losses to social welfare. To do this, we develop a general equilibrium model that distinguishes between public-private healthcare services and public-private healthcare financing.
Our approach resembles contingent valuation methods that introduce a hypothetical market. However, it is different because we use numerical simulation techniques to compare a regulated with a deregulated health-labour market, and the social value is modelled as a byproduct of healthcare services. The model is then calibrated to our unique health-focused Social Accounting Matrix of Israel, and simulates the introduction of a hypothetical health-labour market (which is heavily regulated in the baseline). Using a Monte-Carlo method, we estimate the minimum social value at around 26% of public healthcare financing. We furthermore simulate a deregulated healthcare scenario that internalizes the imputed value of social value. We show that when assessing the best type of healthcare, policymakers should weigh the economic gains of deregulation with the lost social value. Well-being may even decrease in cases of over-privatisation.