Optimal Co-Payment Policy In Health Care: Competition, Ownership Structure And Quality Provision

We analytically characterize the effects of ownership and competition in the health care industry on quality provision, market coverage and optimal co-payment policy. A private monopoly selects a lower quality than a public supplier, and the socially optimal co-payment rate with a private monopoly exceeds that with a public monopoly. We establish that the optimal co-payment policy is invariant to the introduction of private competition. Thus, market coverage is invariant to the introduction of competition, whereas all consumers with a higher willingness to pay for quality are better off with competition.