Comparing the welfare effects of public and private health care subsidies in the United Kingdom

We use a calibrated analytical model to compare the welfare costs (gross of externalities) of increasing subsidies for public and private health care in the UK. The model incorporates wait costs for rationed public care, burdens that subsidies impose on the tax system, and distributional weights for different households. Welfare costs are significantly higher for expanding public health care over a range of parameter scenarios. Both policies reduce average wait times, but for public health care this is offset by new waiting costs incurred on extra treatments. And the burden on the tax system is much larger for expanding public health care. (c) 2005 Elsevier B.V. All rights reserved.