The cost of rationing medical care by insurance coverage and by waiting

This paper raises the question of the least‐cost institutional mechanism to secure the value of certainty by reducing risk over the purchase of medical care. Two methods of reducing risk are evaluated: financing medical care with ‘complete insurance’, that is, ready access to medical care that is free at the point of purchase; and rationing by waiting time in a national health service that supplies a limited volume of medical care. The first system corresponds to the type of insurance held by most people in the United States, while the latter represents a stylized model of a national health service. The cost of over‐utilization of services by insured consumers in the U.S. is substantial ‐ larger on a per‐family basis, and far larger for the nation, than the cost of under‐utilization by those who lack insurance. The cost of rationing by waiting is estimated to be between $541 and $828 per family (in 1984 dollars). Thus, both systems involve costly mis‐allocation of resources.