Class 11 SlidesShifting From Efficient Allocation to

Fair Distribution of Resources

If Suppliers Are More Than Passive Actors in the Markets for Health Care, What Are the Health

Policy Implications?

What Is Your Vision for a Fair Distribution of Resources?

Rawls’s A Theory of Justice and Other Bases for Social Justice

Health Policy Implications linked to your answers to 5 key questions

• Capitation and other forms of incentive reimbursement:– Payment methods designed to discourage induced

demand for health care services– Payment incentives that change levels of health care

financed by health plans and supplied by health providers

• Issues surrounding Patient Cost-Sharing (PCS) – Was RHIE an externally valid measure of the impact of

PCS on behavior of health providers?– Is PCS equitable to users of health care services?

• Alternative strategies social groups have used to limit growth in health services

• Expanding Health Insurance coverage as a strategy for improving productivity

Equity and Redistribution (of wealth)

• Returning to equity in the distribution of resources - issues Rice raises in chapters 1 and 2 but then sets aside in order to focus on efficient allocation of scarce resources.

• Recall in the Traditional Economic Model (TEM), markets encourage trades between consumers and producers that result in equilibrium at Pareto optimum.

• But having reached a Pareto optimum equilibrium, does not mean a society has achieved optimum social welfare.

• Is it best for a society to first address the challenge of equity in the distribution of resources and then encourage free trades that lead to efficient allocation of resources?

Ways the Concept of Ordinal Utility Is Limited As a Basis for Social Justice or

Equity

• Lack of breadth – ignores issues related to social justice and fairness.

• Lack of depth – utilitarianism is defined solely in terms of a single, goods-related psychological metric ignoring other conceptions of utility that seem to drive individual and social welfare.

• Utilitarianism assumes that socially optimum redistribution of wealth should take the form of cash grants rather than transfers of the goods and services themselves.

Social Justice and Fairness• Altruism versus equity, 2 distinctly different

motivations for transferring resources to people in need; altruism is based on individual preferences while equity is extrinsic to individual preferences.

• Social choices are based on individual preferences while social justice is based on principles that determine what rights a person ought to have as a member of society.

• John Rawls’ book A Theory of Justice: A utilitarian philosophy from a different approach. – Justice as fairness.– Original position.– Maximin.– Difference principle.

Other Conceptions of Welfare:Equal Shares of

Something Important

• …[to defend] the inequalities of many variables,…[theorist] needs to relate [inequalities]to equal consideration for all in some adequate substantial way….Sen

• Equality versus fair or just distribution• What is being equalized under utilitarianism?• What them should be equalized? Resources

(Dworkin). Opportunity (Roemer). Capabilities (Sen).

Cash Versus In-kind Transfers

• Desire of donors; to maximize recipient’s utility or to change his consumption pattern?

• Ensuring sufficient donations; In-kind transfers less likely to discourage donor

• Improving productivity; In-kind transfers less likely to discourage work of the recipient