Searching for new ways to finance National Health Services. A note on the role of cost-sharing

Cost sharing has traditionally been invoked to fight the moral hazard associated with full health care insurance (be it public or private). Today’s public finance constraints could, however, revitalize the other, more undervalued function of cost-sharing, namely revenue raising. After briefly summarizing the likely pros and cons of such a function, the paper analyzes the hypothesis of introducing a cost-sharing mechanism on hospitalization days, the assumption being that the rigidity and the size of demand make these latter particularly suitable for revenue raising purposes. The exercise, based on the data provided by Istat, Condizioni di salute e ricorso ai servizi sanitari (Health Conditions and recourse to health services) 2004/2005, applies, in an original way, concentration curves and indexes developed by Kakwani, Wagstaff and Van Doorlsaer (1997) for the analysis of health-care inequalities. The results show that the concentration of hospitalization days among the patients typically exempted from cost-sharing may reduce the days potentially subject to cost-sharing to between 9% to 15% of the total. Protecting the more vulnerable and revenue-raising appear, then, conflicting objectives of cost-sharing policies.