Prioritisation, risk selection, and illness severity in a mixed healthcare system

We study the link between illness severity and the use of public health care services by the privately insured under a mixed healthcare system. Our theoretical model shows that this relationship depends on (1) the prioritisation implemented by public healthcare providers, (2) the stringency of the gatekeeping system, (3) the skewness of the patients' severity distribution, and (4) the private sector's risk selection behaviour. Our empirical analysis reveals that the relationship between illness severity and public healthcare use is U-shaped. As our theoretical model points out, the increasing part of the U-shape is not necessarily a consequence of risk selection by private healthcare providers, but could instead reflect prioritisation within the public sector. According to our analysis, individuals in both extremes of the illness severity distribution will benefit from additional resources to shorten public sector waiting times.