Date of Award
Doctor of Philosophy (PhD)
Economics / Economic Policy
Professor G.L. Stoddart
Assessment of the current performance of the Canadian health care system has led to concern about the capability of current 'treasury-type' management to control health care expenditures can improve the efficiency with which health care is delivered. This thesis builds and employs a stimulation model to illustrate one particular variant of a competitive market reform proposal and investigate its potential for controlling health care expenditures.
The baseline model illustrates a simple formulation of competition between two alternative practice styles within a hypothetical community, under the existing public health insurance plan. Consumers choose to obtain their health care from either capitation reimbursed providers or traditional fee-for-service providers on the basis of an enrollment charge. The enrollment charge reflects differences in the average per capita costs of providing both ambulatory and hospital care to each sector's respective population. The results of the simulation provide the first quantitative estimates of the potential significance of such a policy direction in Canada.
The results indicate that the existence of the capitation modality and the addition of a consumer choice decision can generate significant cost savings. The present value of estimated savings over a ten year period for a community of 80,000 people range from 3 million to 34 million dollars (in 1985 dollars) in the baseline model. The 'best guess' set of parameter values yields an estimate of approximately 31 million dollars.
Extended versions of the baseline model, which include an alternative reimbursement arrangement for the capitation modality and increased competition between the modalities, increase discounted savings in the 'best guess' case to approximately 52 million dollars for the single community. Extrapolation of the results to the province of Ontario yields estimated savings of approximately 1680 million dollars (in 1985 dollars).
Extensive sensitivity analyses on initial parameter values show large variations in potential cost savings. In particular, variations in initial market shares and the initial hospital utilization rate differential between sectors (and to a much lesser extent the enrollment elasticity) can cause large variations in the results. These and other issues identified in the design of the model provide an agenda for future theoretical and empirical work on the subject of publicly financed competition.
Muldoon, Jacqueline MacNaughton, "A Simulation Model of the Potential Contribution of a Competitive Approach to Controlling Health Care Expenditures in Ontario" (1988). Open Access Dissertations and Theses. Paper 2112.