Federalism and tax-financed healthcare: economic advantages, dilemmas, and solutions

Abstract

This chapter analyzes the properties of decentralized systems for providing tax-financed healthcare services. It focuses for the most part on the informational advantages of decentralized provision and (marginal) financing of such systems, which allow best practices to be identified. It also reviews advantages and problems associated with patient mobility and the potential for decentralization to reduce losses from rent seeking. The chapter concludes that decentralized systems, while not perfect, produce healthcare more efficiently and with less rent seeking. By incentivizing useful innovation in delivery, decentralized systems are comparatively in advantage with respect to unitary systems.